Why liquidation exists
A leveraged position controls more value than the collateral posted. The venue must close the position before losses exceed the resources available to settle it.
Liquidation is therefore a risk-control process, not a conventional stop-loss order placed by the trader.
The role of mark price
Many venues use a mark price built from one or more external indexes and a fair-price adjustment. This reduces the chance that a brief, isolated trade on the venue triggers liquidation.
The last traded price, index price, and mark price can differ. Always identify which one the execution venue uses for margin calculations.
Why simple formulas are only estimates
A rough long-position estimate often starts near entry price multiplied by one minus the inverse of leverage. Real calculations also include maintenance margin, fees, funding, margin mode, position tiers, and available account equity.
Liquidation is not a stop-loss
A stop-loss is intended to exit before the account reaches the liquidation threshold. It can still experience slippage or fail during extreme conditions, but it gives the trader a planned exit.
Leaving liquidation as the only exit plan usually means most of the position’s assigned collateral is already at risk.
Liquidation is a process, not one printed number
The displayed threshold is an estimate produced by current collateral, position size, maintenance requirements, fees, and the provider’s risk price. Once the account breaches that threshold, the venue may cancel orders, freeze actions, partially reduce exposure, transfer positions, or close the trade through automated keepers. These workflows differ materially between providers.24
A last-traded price may never touch the displayed liquidation price while the mark or oracle price does. Conversely, crossing a rough calculator estimate does not prove that the provider’s operative threshold was crossed. The provider interface and rulebook remain the source of truth.31