The formula, and its assumptions
For an isolated-margin position on a linear perpetual:
long: liquidation = entry × (1 − 1/leverage + maintenance margin rate)
short: liquidation = entry × (1 + 1/leverage − maintenance margin rate)
The maintenance margin rate is the fraction of the position the exchange requires you to keep. It is exchange-specific, it usually sits between 0.4% and 0.5% for small positions, and — importantly — it rises with position size. Exchanges publish tiered tables: the same 10x position can carry a 0.5% requirement at $10,000 and 1% or more at $500,000, which pushes the liquidation closer for larger traders.
Why the real level is always slightly worse
The formula gives the arithmetic boundary. Three things sit between it and reality, and all three move in the same direction:
- Trading fees are deducted from margin at entry.
- Funding payments on a perpetual are charged every few hours while the position is open. Hold a long through a positive-funding stretch and your margin quietly shrinks, dragging the liquidation price up towards you.
- The mark price, not the last price, is what triggers liquidation on most venues — an index of several exchanges, which protects you from a single-venue wick and exposes you to the broader move.
So treat the number as the optimistic edge. If it looks uncomfortably close, it is closer than it looks.
The table worth internalising
Distance to liquidation is essentially the inverse of leverage:
| Leverage | Approximate distance |
|---|---|
| 3x | ~33% |
| 5x | ~20% |
| 10x | ~10% |
| 20x | ~5% |
| 50x | ~2% |
| 100x | ~1% |
Set that against how crypto actually moves. Bitcoin's ordinary daily range is a few percent; altcoins routinely do more inside an hour. At 20x, the position is not being closed because the idea was wrong — it is being closed by the market breathing. At 50x and above, liquidation is not a risk event, it is the base case.
Isolated against cross, which is the choice that matters more
Isolated margin confines the loss to the margin assigned to that position. The liquidation is closer, and when it happens it is over and the rest of the balance is untouched.
Cross margin draws on the whole balance, so the liquidation price sits much further away — and the position can consume the entire account before reaching it. It converts a bounded loss into an unbounded one in exchange for surviving longer.
Neither is safer in the abstract. Isolated caps the damage; cross buys room. What is genuinely dangerous is using cross without knowing that is what you chose, which is the default on several exchanges.
A stop is not the same as a liquidation
A liquidation is the exchange closing you at its price, at its moment, with a fee attached. A stop is you closing at yours. If the stop sits beyond the liquidation, it will never execute — the position is gone first, and you have paid for a plan that could not run.
The practical check is one subtraction: the stop level must be nearer to the entry than the liquidation price, with room to spare for funding on anything held overnight.