Crypto Liquidation Calculator: The Ultimate Guide

What is Liquidation in Crypto Trading?

Liquidation occurs when an exchange forcefully closes a trader's leveraged position due to a partial or total loss of the trader's initial margin. This happens when the market moves against your position beyond a certain threshold, known as the Liquidation Price.

In futures trading, leverage amplifies both profits and losses. While higher leverage allows for larger position sizes, it also brings the liquidation price closer to your entry price, increasing risk.

Isolated vs. Cross Margin: What's the Difference?

Understanding the difference between these two margin modes is crucial for survival in crypto markets.

1. Isolated Margin

In Isolated Margin mode, the margin assigned to a position is restricted to a specific amount. If the margin falls below the maintenance margin level, the position is liquidated. However, your other funds in your wallet are safe.

• Pros: Risk is limited to the allocated margin only.
• Cons: Easier to get liquidated if volatility is high.
• Formula: Liquidation Price = Entry Price × (1 ± (1 / Leverage)) (Simplified)

2. Cross Margin

In Cross Margin mode, your entire available balance in the futures account is used as margin for your position. This means you are less likely to be liquidated as long as you have enough funds in your wallet.

• Pros: Lower risk of liquidation for the same position size.
• Cons: You risk losing your entire wallet balance if the market crashes hard.

How to Avoid Liquidation?

Here are three golden rules to keep your funds safe:

1. Use Stop-Loss Orders: Always set a stop-loss effectively above your liquidation price.
2. Lower Your Leverage: High leverage (50x, 100x) is a gamble. Stick to 3x-10x for sustainable trading.
3. Monitor Margin Ratio: Keep an eye on your margin ratio. If it approaches 100%, add more margin or close the position.

Conclusion

Liquidation is the nightmare of every trader, but it is mathematically predictable. By using a Liquidation Calculator, you can plan your trades with precision and avoid unnecessary losses. Always trade responsibly.