Crypto liquidation is an exchange’s forced reduction or closure of a leveraged position when the collateral supporting it falls below the venue’s maintenance-margin requirement. A margin call is usually an earlier warning or remediation period, not the liquidation itself. The trigger is commonly based on the exchange’s mark price, so a chart’s last-traded price may never visibly touch the liquidation figure shown when you opened the trade.
The exact threshold, calculation and close-out process depend on the exchange, contract, account type, collateral and current risk tier. Treat every displayed liquidation price as a venue-specific estimate, not a universal number.
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What crypto liquidation means
When you trade with leverage, your own funds (margin or collateral) support a position larger than your deposit. As the position loses value, the equity available to support it declines. The exchange requires a minimum amount of equity—called maintenance margin—to keep the position open.
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1Fix the driver behind crashes, sound loss and screen glitches2Clear out junk files and repair common Windows errors3Scan for outdated or missing drivers - takes under a minuteLiquidation begins when the account or position no longer satisfies that requirement. The venue’s automated risk engine can reduce the position, close it completely, sell collateral, or use other close-out procedures specified in its contract rules. Liquidation is therefore a risk-control action by the exchange, not a voluntary order you place.
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What liquidation is not
- It is not the same as a normal stop-loss. A stop-loss is an order you choose; liquidation is a mandatory risk action.
- It is not triggered by a single universal percentage move. Leverage, position size, margin tier, collateral value, fees, funding and account-wide exposure all matter.
- It is not necessarily based on the last trade printed on the chart. Most major derivatives venues use a mark price or another mark-to-market value for risk calculations.
Margin call versus liquidation
The usual progression is:
- Equity declines. An adverse price move, trading fees, funding debits or a fall in collateral value reduces the equity backing the position.
- The account approaches maintenance margin. The exchange’s risk system measures your equity against the required maintenance amount.
- A warning or remediation window may occur. Some venues notify eligible customers or allow them to deposit collateral or reduce exposure. Coinbase describes a margin call as a period in which eligible clients can add funds or reduce positions before liquidation.
- Partial or full liquidation follows if the shortfall persists. The venue may close enough of the position to restore compliance, or close the entire position under its rules.
This sequence is not guaranteed to look the same everywhere. Kraken states that notifications are not guaranteed and that thresholds can change with market conditions. An alert should therefore be treated as time-sensitive information, not as a promise that you will receive extra time.
Why a margin call can be brief
In fast markets, mark prices can move through a maintenance threshold before you can deposit funds or submit a reducing order. Exchanges may also apply different procedures to isolated positions, cross-margin accounts and portfolio-margin systems. Read the account agreement for the specific product rather than assuming a traditional broker’s grace period applies.
Maintenance margin: the requirement that keeps a position open
Maintenance margin is the minimum equity required to keep an existing leveraged position open. It is normally lower than the initial margin you posted, but it is not a fixed percentage for every trade. Exchanges commonly use maintenance-margin tiers: larger notional positions or greater account exposure can attract a higher requirement.
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Your effective cushion can shrink for several reasons:
- Adverse mark-price movement: unrealized losses reduce account equity.
- Fees: opening, closing and liquidation fees are charged according to the venue’s schedule and may be included in the risk calculation.
- Funding: perpetual contracts can credit or debit funding at scheduled intervals, changing equity even when the market price is nearly unchanged.
- Collateral revaluation: in a cross-margin account, the exchange may value collateral assets using a discount or a changing conversion price.
- Position and tier changes: adding to a trade or increasing total exposure can move you into a different maintenance-margin bracket.
Binance says maintenance-margin changes directly affect liquidation price and that liquidation occurs when the mark price reaches the applicable liquidation price. The requirement is therefore part of a moving risk calculation, not a number locked in when the position was opened.
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Mark price, last price and liquidation price
Last price is the most recent matched trade. It can jump briefly because of a thin order book or a single aggressive order. A mark price is an exchange-generated reference used to estimate fair value and calculate unrealized profit and loss. Its construction can involve an index of external spot prices, a basis or funding component and smoothing rules defined in the contract specification.
Binance states: “Binance uses Mark Price to avoid unnecessary liquidations and to combat market manipulation.” Its liquidation protocol uses mark price, rather than last-trade price alone, for unrealized PnL and liquidation calculations. Coinbase likewise describes mark-to-market pricing as the basis for calculating unrealized PnL, identifying margin violations and initiating liquidation procedures.
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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchThe liquidation price shown in your interface is the estimated mark price at which the position or portfolio would fall below the maintenance requirement. Kraken describes its displayed value in those terms. It is tied to a particular contract, account, collateral balance and risk tier; it is not a universal market level.
Why your chart may not have touched the displayed price
Several explanations are possible:
- The chart was set to last price while the risk engine used mark price.
- The mark-price index moved sharply or updated at a different time than the chart you were watching.
- Fees or funding reduced equity enough to bring the maintenance threshold closer.
- Your position size, account exposure or maintenance tier changed after the estimate was displayed.
- A cross-margin account experienced losses in another position or a decline in collateral value.
- The number was an estimate that changed as the exchange recalculated risk, not a guaranteed execution level.
When investigating, compare the exchange’s mark-price history and position-risk panel with the liquidation event time. A candle’s high or low on a different price feed cannot conclusively show whether the trigger was reached.
How liquidation prices are determined
Every venue uses its own contract and portfolio rules, but the calculation generally seeks the mark price at which your equity equals the maintenance amount plus any charges the venue recognizes. Inputs can include:
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- long or short direction and entry price;
- position size and contract multiplier;
- isolated, cross or portfolio margin mode;
- initial collateral and any additional deposits or withdrawals;
- maintenance-margin schedule and current risk tier;
- mark-price and index methodology;
- unrealized PnL on the position and, in cross margin, other positions;
- accrued trading fees, funding and the venue’s liquidation fee treatment; and
- discounts or haircuts applied to non-cash collateral.
Because these inputs differ, do not copy a formula from one exchange into another. An algebraic expression that ignores tiered maintenance rates, fees or cross-margin effects can produce a dangerously precise-looking but wrong answer.
A practical calculation workflow
- Identify the exact product. Record the contract (for example, a perpetual or dated future), settlement currency, margin mode and direction.
- Open the venue’s position-risk panel or liquidation calculator. Use the calculator for that contract, not a generic website.
- Enter current values. Include entry price, quantity or notional, leverage, collateral, other open positions and any planned additions.
- Check the mark price source. Confirm which index and mark-price method the contract uses and whether the displayed liquidation value updates in real time.
- Review the maintenance tier. Increasing notional can raise the maintenance requirement and move liquidation closer even if leverage appears unchanged.
- Model costs. Check how the venue accounts for closing fees, funding and liquidation fees. Recalculate after a funding debit, partial close or collateral transfer.
- Record a safety buffer. Compare the estimate with the current mark price and decide how much adverse movement your plan can tolerate before adding margin or reducing exposure.
Use the result as a planning reference. It can change before the market reaches the displayed level, especially during volatility or after an account-wide balance change.
What happens during a liquidation
Close-out mechanics are contract-specific. A venue may first reduce part of a position to restore the account above maintenance margin, or it may close the full position. The resulting execution price can differ from the mark price because the liquidation order must trade in the market. Fees may be charged, and the position can be closed at a loss larger than the amount implied by a static screenshot of the liquidation estimate.
Exchanges publish additional mechanisms such as insurance funds, auto-deleveraging or other loss-sharing procedures. These mechanisms, eligibility rules and fee treatment differ by venue and jurisdiction. Read the product’s liquidation protocol before trading; do not assume that unused margin will always be returned or that losses are capped at your posted collateral.
Partial versus full liquidation
- Partial liquidation: only enough exposure is reduced to bring the account back within maintenance requirements, when the venue’s rules and liquidity permit it.
- Full liquidation: the entire position is closed, often when the deficiency is severe, the product requires it or partial reduction cannot restore compliance.
- Cross-margin consequences: because multiple positions share collateral, a liquidation in one market can consume equity that would otherwise support another position.
How to reduce liquidation risk
Use less leverage
Lower leverage means more of the position is funded by your own collateral, leaving a larger adverse-price distance before maintenance margin is reached. It does not remove risk: a sufficiently large move, fee burden or collateral decline can still cause liquidation.
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Keep a deliberate maintenance buffer
Do not treat the displayed liquidation price as your planned exit. Define an earlier risk limit, monitor the mark price and leave room for volatility, funding and execution costs. A buffer should be based on the specific contract’s historical and current volatility rather than a universal percentage.
Choose margin mode consciously
Isolated margin limits the collateral assigned to a position, while cross margin shares account equity across positions. Cross margin can provide more room for one trade but can also expose the rest of the account to its losses. Confirm the mode before placing or adding to a position.
Monitor the right data
- Watch mark price as well as last price.
- Check maintenance-margin ratio, available collateral and unrealized PnL.
- Review upcoming funding and all open positions.
- Keep app and email alerts enabled, but do not rely on receiving a warning; Kraken says notifications are not guaranteed.
Have a response plan
Decide in advance whether you will add collateral, reduce size, close the trade or accept a defined loss. During a fast move, a deposit or order can be delayed, rejected or filled at a worse price. A precommitted plan is more reliable than trying to invent one after a margin alert.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Common mistakes and how to troubleshoot them
“The wick never reached my liquidation price.”
Verify whether you compared a last-price chart with a mark-price trigger. Then check the mark-price feed, event timestamp, funding and fee entries, and whether your maintenance tier or collateral balance changed.
“I received no margin-call warning.”
Check whether your account type is eligible for notifications and whether alerts were enabled. Notifications can be optional, delayed or unavailable, and Kraken specifically warns that they are not guaranteed. Manage risk as though no warning will arrive.
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“Adding leverage did not show the result I expected.”
Recheck position notional, contract multiplier, margin mode and the maintenance tier. A calculator that assumes linear contracts may not apply to inverse or otherwise differently margined products.
“My liquidation price moved after I opened the trade.”
That can be normal. Mark price, unrealized PnL, funding, fees, collateral value, position size and risk tiers can all change. Save the venue’s current estimate and inputs whenever you add, reduce or transfer margin.
Venue rules and documentation to compare
If you are evaluating exchanges, compare the rules rather than only the headline leverage multiple.
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|---|---|
| Mark-price methodology | Which index feeds the mark price? How often is it updated, and what happens during an index disruption? |
| Maintenance-margin tiers | How does the required margin change with notional size or account exposure? |
| Close-out method | Does the venue reduce positions partially, liquidate fully, or use different rules by product? |
| Fees and funding | Which charges reduce equity and how are liquidation fees calculated? |
| Warnings and remediation | Who receives margin-call notices, through which channels, and is any response window guaranteed? |
| Loss-management mechanisms | What insurance fund, auto-deleveraging or other procedures apply after close-out? |
Use the current contract specification and liquidation protocol for your jurisdiction and account type. Binance’s liquidation protocols were updated in 2026, while the rules for other products can change independently.
Key takeaways for leveraged traders
- Liquidation is forced position reduction or closure after equity falls below maintenance margin.
- A margin call is a possible warning or remediation stage, not a guaranteed grace period.
- Mark price—not necessarily the chart’s last price—usually drives unrealized PnL and liquidation checks.
- Liquidation estimates change with maintenance tiers, collateral, fees, funding, position size and account-wide exposure.
- Use the exact venue’s calculator and contract rules; there is no universal liquidation formula.
- Lower leverage, a meaningful buffer and continuous mark-price monitoring reduce—but do not eliminate—the risk.
Frequently Asked Questions
Can an exchange liquidate a position without sending a margin-call email?
Yes. Notification policies vary by venue and account eligibility, and some documentation says alerts are not guaranteed. Monitor the account’s maintenance ratio and mark price directly.
Does liquidation mean I lose only the margin assigned to that trade?
Not necessarily. Isolated margin limits the collateral assigned to one position, while cross margin can draw on shared account equity. Fees, funding and the venue’s close-out rules also affect the final result.
Can a stop-loss guarantee that liquidation will not occur?
No. A stop-loss may fail to execute at its trigger during gaps, thin liquidity or rapid movement, and liquidation risk is assessed using the venue’s mark-price and maintenance rules.
Are ordinary spot purchases subject to liquidation?
A fully paid spot purchase normally has no leveraged maintenance-margin requirement. Borrowing, margin trading or derivatives attached to the account can introduce liquidation risk under their own rules.
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