Question 1

What is liquidation in crypto futures trading?

Accepted Answer

Liquidation occurs when your leveraged futures position loses enough value that your margin balance can no longer cover the losses. The exchange automatically closes your position at the liquidation price to prevent your account from going negative. Higher leverage means the liquidation price is closer to your entry price — even a small adverse price move can trigger liquidation.

Question 2

How do I calculate my liquidation price?

Accepted Answer

For a long position: Liquidation Price ≈ Entry Price × (1 − 1/Leverage + Maintenance Margin Rate). For a short: Entry Price × (1 + 1/Leverage − Maintenance Margin Rate). For example, a long at $50,000 with 10x leverage and 0.5% maintenance margin liquidates at approximately $45,500. Enter your values in the calculator for the exact result.

Question 3

What is the difference between isolated and cross margin?

Accepted Answer

Isolated margin limits your risk to the margin allocated to a specific position — if that position is liquidated, only the isolated margin is lost. Cross margin uses your entire account balance as collateral across all positions, allowing positions to absorb losses from each other, but a single bad position can deplete your entire account. Isolated margin is generally recommended for beginners.

Question 4

How far should my stop-loss be from my liquidation price?

Accepted Answer

Your stop-loss should always be set at a distance that exits the trade well before liquidation — typically at least 2–3× the liquidation distance from your entry. For example, if your 10x long entry is $50,000 and liquidation is $45,500 (a 9% move), set your stop-loss at $48,000–$49,000 (2–4% from entry) to exit with a controlled loss long before liquidation is reached.

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