Leverage and liquidation, without the marketing
Leverage is advertised as a feature and experienced as a countdown. The arithmetic is simple enough that it is worth doing once, properly, because the number that ends a position is not the leverage you selected.
- Live product data
- Self-custodial
- Human confirmed
What leverage actually does
Leverage is the ratio between position size and the margin behind it. Two hundred dollars of margin at ten times is a two thousand dollar position. Your profit and loss are computed on the two thousand, which is the appeal, and your margin is the two hundred, which is the entire buffer. Nothing else changes: the same asset, the same price, a bigger multiplier on both directions.
Maintenance margin is the real threshold
A venue requires you to keep some fraction of the position value as margin. Fall below that maintenance level and the position is closed for you. The distance from your entry to that point, expressed as a percentage move, is roughly the inverse of your leverage minus the maintenance requirement. At twenty times, a five percent adverse move is already most of your buffer.
What price triggers it
Serious venues liquidate off an oracle or mark price, not the last trade on their own book. That distinction protects you: a momentary wick caused by thin liquidity should not close a position that the wider market never moved against. It is worth checking which price a venue uses before sizing a position, because the ones that liquidate off their own last trade are meaningfully more dangerous.
- Position size = margin × leverage
- Liquidation happens at the maintenance level, not at zero margin
- Funding is deducted from margin and moves the liquidation price over time
- Adding margin moves the liquidation price away; adding size moves it closer
Sizing backwards from the risk
The useful habit is to pick the loss you are willing to take and the invalidation level for the trade, then derive the size from those two, rather than picking a leverage number first and discovering the liquidation price afterwards. A stop placed inside the liquidation price is what turns a leveraged position into a bounded one.
Liquidation is not always all or nothing
Several venues liquidate in stages: they close part of the position, which reduces the margin requirement, and stop if that restores health. That is better for you than a full closeout, because it leaves something on the table if the price recovers. It is also not free. Each partial closure pays a liquidation fee and fills at whatever the book offers, so a position that is partially liquidated three times on the way down has paid three fees and taken three sets of slippage before it is finished.
Frequently asked questions
- Does higher leverage mean I lose more money?
- It means you lose your margin faster on the same price move. The dollar loss is set by position size, so a large position at low leverage and a small one at high leverage can carry the same risk. Leverage decides how much room you have before the position is closed for you.
- Can I lose more than I deposited?
- On most venues the liquidation engine closes you out before the account goes negative, and an insurance fund absorbs the gap in a fast move. In a violent enough gap that fund can be exhausted, which is when socialised losses or clawbacks appear. Treat "you cannot lose more than your margin" as usually true rather than guaranteed.
- Why did I get liquidated when the chart never reached my liquidation price?
- Almost always because the venue liquidated off a mark or oracle price rather than the candle you were watching, or because funding had eaten margin and moved the level since you opened. Both are visible before the fact if you check the position detail rather than the chart.
- Is there a leverage setting that is safe?
- No setting is safe on its own, because risk is size times distance to your stop, not the multiplier. Low leverage with a position far larger than your account is worse than high leverage on a small one.
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Move from reference to the live product when you are ready.
Perpetual futures are leveraged instruments and can lose more than your initial margin. Nothing on this page is investment advice.