How Liquidation Price Works: Approximate It, Then Verify the Exchange

Direct answer: Your liquidation price is the mark price at which your remaining margin equals the exchange's maintenance margin requirement. For an isolated long, a usable approximation is liquidation price = (entry × size − margin) ÷ (size × (1 − maintenance margin rate)); for a short, swap the signs. The approximation is good for stress tests, but the figure that will actually be enforced is the one in your exchange's order preview, because maintenance margin changes with position-size tiers, cross margin shares your whole wallet, fees and funding erode margin, and Binance and Bybit both trigger on mark price, not last price (checked 2026-11-01). Use the formula to size the trade, then read the exchange figure before you confirm.

What liquidation price actually measures

Every leveraged position has two margin numbers. Initial margin is what you posted to open it, set by your leverage. Maintenance margin is the smaller amount the exchange insists you keep as a buffer so it can close the position before your balance goes negative. As price moves against you, unrealized loss is subtracted from your margin; when what remains falls to the maintenance requirement, the exchange takes over. Binance defines this as the margin ratio (maintenance margin ÷ margin balance) reaching 100%, and its liquidation protocols state that liquidation occurs when the mark price hits the liquidation price (checked 2026-11-01). Bybit's unified-account rules say the same: liquidation is triggered by mark price, not last traded price (checked 2026-11-01). Mark price is derived from index prices across venues and is deliberately smoother than last price, so a wick on one exchange's chart does not by itself liquidate you, and a move in the index can liquidate you even if the local last price never printed there.

The approximation, and what it leaves out

For an isolated long position with no fees or funding: liquidation price = (entry × size − margin) ÷ (size × (1 − MMR)), where MMR is the maintenance margin rate. For a short: (entry × size + margin) ÷ (size × (1 + MMR)). A quicker mental version is distance ≈ 1 ÷ leverage − MMR. Four things make the real figure differ:

• Maintenance margin tiers. On Binance USDⓈ-M futures, Maintenance Margin = notional × maintenance margin rate − maintenance amount, and both the rate and the deduction step up with notional size (per Binance's leverage-and-margin page, checked 2026-11-01). Binance's August 2025 tier announcement lists BTCUSDT at 0.40% up to 300,000 USDT notional, 0.50% up to 800,000 and 0.65% up to 3,000,000 (checked 2026-11-01; confirm on the live Leverage & Margin page).
• Cross margin. In cross mode your whole wallet balance, plus or minus unrealized PnL on other positions, is the margin. The liquidation price is farther away, but a loss on one position can drain the margin supporting the others.
• Fees and funding. Bybit's published formula reserves the taker fee needed to close the position, and funding payments are debited from margin every settlement, so a long held through several positive-funding periods sees its liquidation price creep up.
• The liquidation itself. Binance cancels open orders first, then tries a single IOC order to reduce the position, and only if the account is still deficient closes it at the bankruptcy price with the Insurance Fund taking over; a clearance fee is charged on the liquidated amount (checked 2026-11-01). The executed price can differ from the calculated one in gaps.

Worked example: one position, four scenarios

Long 0.1 BTC at 100,000 USDT, notional 10,000 USDT, 10x leverage, 1,000 USDT initial margin, MMR 0.40% (Binance BTCUSDT tier 1, checked 2026-11-01), ignoring fees and funding.

For comparison, Bybit's own help-centre example for a 1 BTC long at 40,000 USDT with 50x leverage, 3,000 USDT of added margin, a 0.5% MMR and the 0.055% taker fee gives a liquidation price of 36,380.25 USDT (checked 2026-11-01), about 9% below entry even at 50x, which shows how much added margin changes the answer. Reproduce these in the liquidation calculator; if the exchange preview disagrees with your number by more than fees and funding can explain, you have probably used the wrong tier or margin mode.

Step-by-step: from formula to confirmed order

1. Set the loss budget and the stop first. Use the position size calculator to turn a maximum loss and a stop distance into a quantity; the position-size formula article shows the arithmetic.
2. Look up the maintenance margin tier for that notional on the exchange's leverage and margin page, not from memory.
3. Compute the approximate liquidation price with the formula above or the calculator, in both directions if you are unsure of your bias.
4. Open the order ticket and read the exchange's estimated liquidation price. It already includes the tier, margin mode and, on some venues, the closing fee.
5. Check the stop sits well inside the liquidation distance. If the stop is more than about half of the way to liquidation, lower leverage or reduce size.
6. Attach the stop-loss to the order as a conditional order triggered on mark price, consistent with how liquidation is triggered; see the stop-loss and take-profit guide.
7. Re-read the liquidation price after each funding settlement and after any partial close, because both change margin; the funding rate monitor shows the current rate.

Mistakes that make the formula lie

• Using tier-1 MMR for a large position. Above the first bracket the rate rises and the maintenance amount deduction kicks in; the liquidation price moves closer to entry than the shortcut suggests.
• Treating "safe leverage" tables as universal. The same 10x on a volatile small-cap with a 2.5% MMR has a much shorter distance than 10x on BTC. There is no fixed safe multiplier.
• Ignoring cross-margin contagion. In cross mode a second position's loss shortens the first position's distance to liquidation, even if the first is in profit.
• Watching last price. Set alerts on mark price; liquidation uses mark price on Binance and Bybit (checked 2026-11-01).
• Assuming the liquidation price is a stop-loss. Liquidation costs the clearance fee plus the worse fill of a forced IOC order, and can cascade into the Insurance Fund and auto-deleveraging in extreme conditions; a stop you chose is almost always cheaper.
• Trading liquidation heatmaps as certainties. Heatmaps estimate where leveraged positions might be liquidated; they do not prove price will go there. The heatmap guide explains what they can and cannot tell you.

Related tools and guides

• Liquidation price calculator
• Position size calculator
• Risk/reward calculator
• Leverage and liquidation basics
• Liquidation calculator guide for beginners
• Funding rates explained
• Five iron rules of risk management

FAQ

Why does the exchange show a different liquidation price from my calculation?

Usually one of four reasons: a higher maintenance margin tier for your notional, cross margin counting your whole wallet, the closing fee reserved in the venue's formula, or funding already debited from margin. The exchange figure is the one enforced.

Does adding margin always help?

Adding isolated margin moves the liquidation price away from entry, as the 500 USDT row in the example shows. It also increases the capital at risk in a trade that is already going wrong, so decide the rule in advance rather than in the moment.

Is the liquidation price the same for a long and a short at the same leverage?

Not quite. In the example the long liquidates 9.64% below entry and the short 9.56% above, because the maintenance margin is applied to a larger notional as price rises. The difference grows with the MMR.

What happens if price gaps through my liquidation price?

Binance closes the position at the bankruptcy price and the Insurance Fund absorbs the shortfall; if the fund cannot, auto-deleveraging closes profitable positions on the other side, ranked by profit and leverage (checked 2026-11-01).

Can I avoid liquidation entirely with a stop-loss?

A stop-loss placed well inside the liquidation distance exits before the exchange does in normal conditions. In a gap or an illiquid market the stop may fill far from its trigger, so the stop reduces liquidation risk rather than removing it.

Bottom line

The formula tells you roughly where a position dies; the exchange tells you exactly. Use the approximation to choose size and leverage, read the venue's figure before confirming, keep the stop well inside it, and re-check after funding and partial closes.

Educational content only, not investment advice. Maintenance margin tiers, liquidation procedures and fee rates change; verify the figures in your logged-in exchange account before trading.