The Liquidation Price Is Closer Than You Think
Bitcoin at $100,000. You're long with 20x leverage. Your exchange shows liquidation at $95,000.
You think: "I have a 5% buffer. Plenty of room."
You don't. You have a 4% buffer after accounting for the liquidation threshold. And during a volatile move, that 4% can disappear in 15 minutes.
Here's what actually protects you—and what doesn't.
The Liquidation Formula (No Mystery, Just Math)
Important: Our calculator uses the isolated margin formula. This means each position is independent—liquidation of one position doesn't affect your other trades or account balance beyond that position's margin.
Every exchange uses variations of this formula. Here's the simplified version:
``` For Longs (Isolated Margin): Liquidation Price = Entry - ((Margin - (Margin × Threshold%)) / Position Size)
For Shorts (Isolated Margin): Liquidation Price = (Leverage × (Margin + (Entry × Volume))) / (Volume × (Threshold% + Leverage))
Where:
- Margin = Total Position / Leverage
- Threshold = Maintenance margin % (typically 40-50%)
- Position Size = Quantity of asset ```
Our calculator accounts for fees: We subtract trading fees and projected funding costs from your margin to show your real liquidation price after costs—not the theoretical one.
Threshold is usually 40-50% on most exchanges (we default to 40% for conservative estimates).
Real Examples (BTC at $100,000)
10x Leverage Long: ``` Liquidation = $100,000 - ($100,000 × (1/10) × 0.4) Liquidation = $100,000 - ($100,000 × 0.1 × 0.4) Liquidation = $100,000 - $4,000 Liquidation = $96,000 Buffer: 4% ```
20x Leverage Long: ``` Liquidation = $100,000 - ($100,000 × (1/20) × 0.4) Liquidation = $100,000 - ($100,000 × 0.05 × 0.4) Liquidation = $100,000 - $2,000 Liquidation = $98,000 Buffer: 2% ```
50x Leverage Long: ``` Liquidation = $100,000 - ($100,000 × (1/50) × 0.4) Liquidation = $100,000 - ($100,000 × 0.02 × 0.4) Liquidation = $100,000 - $800 Liquidation = $99,200 Buffer: 0.8% ```
100x Leverage Long: ``` Liquidation = $100,000 - ($100,000 × (1/100) × 0.4) Liquidation = $100,000 - ($100,000 × 0.01 × 0.4) Liquidation = $100,000 - $400 Liquidation = $99,600 Buffer: 0.4% ```
The Dangerous Misconception
What traders think: "My liquidation is $96,000, BTC is at $100,000, so I have a $4,000 or 4% buffer."
What's actually true: "BTC needs to drop 4% to hit my liquidation. At current volatility (±3-6% daily), I could get liquidated on a normal swing."
Volatility Reality Check
Let's look at actual Bitcoin volatility data:
Typical daily movement (2024-2025):
- Low vol day: ±2%
- Average day: ±3-4%
- High vol day: ±6-8%
- Extreme event: ±15-20%
Now compare to liquidation buffers:
5x Leverage = 8% buffer
- ✓ Safe from: Low and average volatility days
- ⚠️ Dangerous during: High volatility events (6-8%+ swings)
10x Leverage = 4% buffer
- ✓ Safe from: Low volatility days only
- ⚠️ Dangerous during: Average daily movements (3-4%)
20x Leverage = 2% buffer
- ✓ Safe from: Nothing
- ⚠️ Dangerous during: Normal market volatility
50x Leverage = 0.8% buffer
- ✓ Safe from: Nothing
- ⚠️ Dangerous during: Every single hour
100x Leverage = 0.4% buffer
- ✓ Safe from: Nothing
- ⚠️ Dangerous during: A single candle wick
At 20x or higher, normal market volatility can liquidate you.
You're not betting on being wrong about direction. You're betting that BTC won't wick 2% against you before moving in your favor.
The Wick Problem
Here's what really kills overleveraged traders:
Scenario: BTC Flash Crash
- Opening price: $100,000
- Your entry: $100,000 long at 20x
- Liquidation: $98,000
- Flash wick down to: $97,500
- You're liquidated
- Closing price 10 minutes later: $100,500
You were right about direction. The daily candle closed green. But you still got liquidated because the wick hit your liquidation price.
This happens constantly. High leverage traders watch BTC close exactly where it opened, but they're liquidated because of intraday wicks.
How Funding Fees Narrow Your Buffer
Here's what most traders don't realize: Funding fees reduce your margin, which pushes your liquidation price closer.
Example:
- Entry: $100,000 at 10x leverage
- Initial margin: $10,000
- Initial liquidation: $96,000 (4% buffer)
- Daily funding cost: $30
- After 30 days: $900 in fees paid
- New margin: $9,100
- New liquidation: $96,360
Your liquidation price moved $360 closer without BTC moving at all.
After 60 days of funding? Your liquidation is at $96,720. Your buffer shrunk from 4% to 3.28%.
Hold for 90 days? Liquidation is at $97,080. Buffer is now 2.92%.
This is why traders get liquidated in ranging markets. BTC trades sideways for 2 months, funding fees drain margin, and suddenly a normal 3% wick liquidates you.
Visual Risk Levels
We color-code liquidation buffers in our calculator:
Green (10%+ buffer):
- Safe from normal volatility
- Usually 5x leverage or less
- Can weather most market moves
Yellow (5-10% buffer):
- Moderate risk
- Vulnerable to high vol days
- Usually 5-10x leverage
- Requires monitoring
Amber (2-5% buffer):
- High risk
- Normal volatility is dangerous
- Usually 10-20x leverage
- Needs constant watching
Red (<2% buffer):
- Critical risk
- One wick kills you
- Usually 20x+ leverage
- Not recommended unless you know exactly what you're doing
The Liquidation Cascade
Here's the worst part about tight liquidation buffers: you can cause your own liquidation.
How liquidation cascades work:
- BTC at $100,000
- 1000 traders are long at 20x (liquidation: $98,000)
- BTC drops to $98,500
- A few traders panic-sell
- BTC hits $98,000
- Mass liquidations trigger
- Exchange force-sells 1000 positions
- This selling pressure pushes BTC down further
- Hits the next liquidation level ($97,000 for 25x traders)
- More forced selling
- BTC drops to $95,000
Traders at $100,000 with 10x leverage (liquidation: $96,000) now get liquidated too—even though they started with "safe" leverage.
Your liquidation buffer isn't just about your position. It's about everyone's positions.
What Actually Protects You
1. Lower Leverage
The single most effective protection:
- 50x → 20x: Buffer goes from 0.8% to 2%
- 20x → 10x: Buffer goes from 2% to 4%
- 10x → 5x: Buffer goes from 4% to 8%
2. Add Margin (But Be Careful)
If your position is near liquidation, adding margin moves the liquidation price down:
Example:
- Current: $10,000 position, $1,000 margin, liquidation at $96,000
- Add $500 margin
- New liquidation: $94,667
- Buffer increases from 4% to 5.33%
But: Adding margin to a losing position is averaging down. If you're wrong about direction, you're just throwing more money away.
3. Set Price Alerts BEFORE Liquidation
Most traders wait until they're near liquidation to act. By then, slippage and panic make it hard to exit cleanly.
Better approach:
- Liquidation at $96,000
- Set alert at $97,000 (1% before liquidation)
- Gives you time to close manually or add margin calmly
4. Account for Funding Fees
If you're holding for weeks/months, calculate how much funding will eat into your margin:
- Holding 30 days? Subtract 30 days of funding from your margin
- Recalculate liquidation with reduced margin
- This is your REAL liquidation risk
5. Never Use Maximum Leverage
Even if your exchange offers 100x or 125x:
- It's designed to liquidate you
- You're betting on zero adverse movement
- One 0.5% wick ends your position
Professional traders rarely use above 10x. Ever.
Our Liquidation Calculator
We show you:
1. Exact liquidation price - Down to the dollar, using the actual formula
2. Buffer percentage - How much room you have before liquidation
3. Color-coded risk - Green/yellow/amber/red based on buffer size
4. Impact of funding - How fees will narrow your buffer over time
5. Suggested safer leverage - "Reduce to 7x for 8% buffer"
6. Dollar distance - "$4,000 from liquidation" is clearer than "4%"
Common Mistakes
Mistake 1: "I'll close before liquidation"
You won't. When BTC is moving fast, you'll freeze. Or you'll convince yourself it'll bounce. Or the exchange will lag. Or you'll be asleep.
Mistake 2: "I'll add margin if it gets close"
Same problem. When you're near liquidation, you're panicking. You'll add margin to a bad position and lose more.
Mistake 3: "Liquidation is just for reckless traders"
Professional traders get liquidated too. The difference is they use position sizing so that liquidation means losing 2% of their account, not 100%.
Mistake 4: "Volatility won't hit my level"
It will. BTC has wicked 5-15% in a single move dozens of times. Your 2% buffer is not safe.
The Right Way to Use Leverage
Not this:
- Use maximum leverage available
- Hope BTC doesn't wick against you
- Panic when you're near liquidation
- Add margin desperately
- Get liquidated anyway
This:
- Calculate liquidation before entering
- Ensure buffer is >5% (10%+ is safer)
- Size position so liquidation = acceptable loss (1-2% of account)
- Set price alerts before liquidation
- Close manually if thesis invalidates, don't wait for forced close
Real Example: Safe vs Reckless
Scenario: You have $10,000. You want $100,000 BTC exposure.
Reckless Approach:
- Use 100x leverage
- Margin: $1,000
- Liquidation buffer: 0.4%
- Risk: One wick destroys you
- If liquidated: Lose $1,000 (10% of account)
Professional Approach:
- Use 10x leverage
- Margin: $10,000 (full account)
- Liquidation buffer: 4%
- Position size: $100,000
- Risk: Same exposure, safer buffer
- If liquidated: Lose $10,000 (100% of account)
Wait, that's worse?
Better Professional Approach:
- Use 10x leverage
- Margin: $2,000 (20% of account)
- Position size: $20,000 (not $100,000)
- Liquidation buffer: 4%
- If liquidated: Lose $2,000 (20% of account)
- Now you can survive 5 liquidations and still have capital left
Key Takeaways
- Know your exact liquidation price - Don't guess, calculate
- Understand your buffer - 4% is not "plenty of room"
- Account for funding fees - They narrow your buffer over time
- Beware of wicks - Daily candles lie, intraday moves kill positions
- Use lower leverage - 10x max for most traders, 5x is safer
- Set alerts early - Before you're in panic mode
- Position size for survival - Liquidation should not end your trading career
Use Our Calculator
Enter your position details. We'll show you:
- Exact liquidation price
- Actual buffer percentage
- Risk level (color-coded)
- Impact of fees over time
- Recommended safer leverage
Because knowing where you get liquidated isn't paranoia. It's the minimum requirement for responsible leverage trading.
Calculate your liquidation price and true safety buffer before you risk your capital →
