How a liquidation price is calculated

A liquidation price is the price at which a venue closes a position because the collateral behind it has fallen to the minimum it will accept. That minimum is called maintenance margin, and the formula in general circulation leaves it out — which puts the liquidation further from entry than the venue actually will. The error is in the direction that costs money.

The formula you will usually be given

For a long position, almost every calculator and explainer computes:

liquidation = entry × (1 − 1 ÷ leverage)

The reasoning is intuitive and wrong. At 10× leverage the margin posted is a 10th of the notional, so a move of a 10th against the position wipes it out — $100.00 becomes $90.00. That would be correct if the venue let the collateral reach exactly zero. No venue does, because a position with zero collateral cannot be closed without someone else absorbing the shortfall.

What maintenance margin adds

The venue closes the position while there is still something left: a fixed fraction of the notional that must remain at all times. On Hyperliquid that fraction is half the initial margin required at the tier's maximum leverage — so a tier permitting 10× carries a maintenance margin of 5.00% of notional. Because the position must be closed while that fraction survives, the liquidation price moves towards entry:

liquidation = entry × (1 − 1 ÷ leverage) ÷ (1 − maintenance margin fraction)

The same position, worked twice

A long on a contract trading at $100, opened at 10× on the venue's tiered 10x margin table. The only difference between the two columns is size.

Every figure in this table is computed on render by the same function the calculators call, over a margin table committed to this project. Nothing here is a number somebody typed in once.

Why the larger position is worse off

Maximum leverage is not a property of the venue or of the coin. It is a property of the tier, and tiers step down as the position grows, because a larger position is harder to close without moving the price. On the table used above, positions up to $3.00M may use 10×; above that the cap falls to 5×, and the maintenance margin fraction doubles with it.

Two consequences follow, and neither is visible in the common formula. A request for 10× on a position above the boundary is silently clamped to 5×, so the position is smaller than intended relative to margin. And the liquidation price sits 11.11% from entry rather than 5.26% — the same order, at a different size, with different room.

Cross and isolated margin

Everything above assumes the position stands on its own collateral — isolated margin. Under cross margin the account's whole free balance backs every position, so the liquidation price of any one of them depends on what the others are doing, and it moves when they do. The arithmetic here is the isolated case because it is the one that can be stated for a single position; under cross margin the same formula gives the price at which that position alone would exhaust its share, which is a floor rather than an answer.

What this does not include

Funding payments are deducted from collateral while a position is open, which moves the liquidation price gradually in the direction of the payment — a long paying funding is liquidated slightly earlier each hour it holds. Fees do the same. Neither is in the formula above, and over a long hold at a high rate the effect is not negligible: what funding costs is the other half of the same arithmetic.

Where to go next