Liquidation

The liquidation price is calculated from the entry price, the leverage used, and the maintenance margin requirement — once price reaches that level, the exchange closes the position automatically, regardless of what the trader wants.

For example, $1,000 of margin at 10x leverage on a $10,000 position, with a maintenance margin of 0.5% ($50), gets liquidated once losses eat through roughly $950 of that margin — a move of about 9.5% against the position price, far less than the 100% move it would take to lose everything on an unleveraged position.

A common mistake is setting leverage so high that ordinary daily price volatility alone is enough to trigger liquidation, wiping out the position without the trader ever being wrong about the eventual direction.