How is the liquidation price calculated?

Roughly, it is the entry price moved against you by (1 / leverage) minus the maintenance margin. At 100x, the buffer is roughly 1%. At 500x, it is well under 0.5%. Most platforms display the exact liquidation price before you open the position.

Can I lose more than my margin if I get liquidated?

On modern isolated-margin perps, no. Your loss is capped at the margin you posted on that position. On cross-margin setups, a cascading liquidation can pull from your other positions. Always check the margin mode.

Does a stop loss prevent liquidation?

Yes, if the stop is placed inside the liquidation buffer and actually fills. In a fast market the stop can slip past the trigger and you can still hit liquidation. Stops are insurance, not guarantees.

Who liquidates my position?

On a CEX, the exchange's internal engine. On on-chain perps, automated keeper bots watch positions and trigger the liquidation contract when the price hits the threshold.

Can I "save" a position from liquidation?

You can add margin before the threshold is hit, which pushes the liquidation price further away. You cannot intercept a liquidation once it has triggered. Be careful: adding margin to a losing thesis is a classic way to lose multiples of the original position.

what is liquidation in perp trading

Q: What is liquidation in perp trading?

Liquidation is when the venue forcibly closes your position because your margin is no longer enough to cover potential further losses. It happens automatically when the market price hits your liquidation price.

You opened a 50x long, walked to the kitchen for a coffee, came back to a notification that said "liquidated" and a position size of zero. Where did the money go. What just happened. Why did nobody warn you. This is the post you wanted before that happened, written for the person who is about to do it again on a higher leverage tomorrow.

Liquidation is the single most important concept in perp trading. Every other piece of advice — sizing, leverage, stop losses, funding — is downstream of understanding what liquidation actually is and when it actually fires. This explainer is the no-bs version.

the simple definition

Liquidation is the forced closing of your position by the venue when your margin is no longer sufficient to cover potential further losses. Translated: the platform sells your position out from under you, takes the remaining margin to cover the loss, and you walk away with whatever is left, which is usually nothing.

It is not punishment. It is automated risk management. Without forced liquidation, a losing position could rack up losses bigger than the collateral, and either the venue or the rest of the users would have to eat the difference. Liquidation exists so that risk stays contained to the trader who took it.

how it actually works

Every perp position has a liquidation price. When the market price hits that level, the position is forcibly closed by a liquidator (a bot, or an automated keeper, depending on the venue). The remaining margin, minus any liquidation fee, returns to the trader. On most modern perps that remainder is zero.

The calculation of the liquidation price is straightforward in concept. Three inputs.

Entry price: where you opened the position.
Leverage: how much exposure per unit of margin.
Maintenance margin: a small percentage the venue requires you keep posted at all times.

Your liquidation buffer is roughly 1 divided by your leverage, minus the maintenance margin. At 100x leverage with a 0.5% maintenance margin, your buffer is roughly 0.5%. A 0.5% adverse move and you are out.

who actually closes your position

On a CEX, the exchange runs an internal liquidation engine that auctions or unwinds the position into the order book. On an on-chain perp like Avantis, GMX, or Hyperliquid, an automated keeper bot watches positions and triggers liquidations when the price crosses the threshold. The bot usually earns a small fee for doing the work. Either way, the trader has no role in the process. It happens to you, not by you.

why it matters for traders

Understanding liquidation reframes how you should size and choose leverage. The two things that determine your liquidation price are your entry and your leverage. Once those are set, the price required to take you out is fixed. The market either crosses it or does not.

Your liquidation price is your hard stop. If you would not put a stop loss there, you should not be running that leverage.
The distance between entry and liquidation is your runway. Volatility eats runway. Choose leverage based on the asset's typical wiggle, not your conviction.
Funding payments slowly bleed your margin. A position held for days at high funding can drift its effective liquidation price closer to entry without the market moving at all.
Adding margin to a losing position pushes the liquidation price further away. This is a real tool but a dangerous one. Adding margin to defend a bad thesis is how people lose multiples of their original size.

Liquidation is not a partial loss. It is a complete loss of the margin attached to that position. Treat the liquidation price as the price at which your capital evaporates, not a "warning level".

common misconceptions

A lot of mythology around liquidation that wrecks new traders.

"The platform hunts my stop." On an on-chain perp, the liquidation price is a function of public on-chain state. Nobody is "hunting" you. The market just moved.
"I will get a margin call first." Crypto perps generally do not have margin calls in the traditional sense. The system just liquidates when the threshold is hit.
"I can recover my margin if I act fast." No. Once liquidation triggers, the position closes automatically. You cannot intercept it.
"My stop loss saves me from liquidation." Only if the stop is closer to entry than the liquidation price and the order actually fills. In a fast market, the stop can slip and you can still hit liquidation.
"Liquidation is rigged." On a transparent on-chain venue, the liquidation logic is in public smart contracts. You can read it. It is not rigged, it is mechanical.

how to avoid getting liquidated

There is no magic. There are five disciplines.

Lower leverage. The single highest-impact knob. 10x has 10x the runway of 100x. Use the lowest leverage that still gets you the exposure you want.
Smaller position sizes relative to your account. If a full liquidation is recreational, you can survive a bad streak.
Closer stops than your liquidation price. Take the small loss before the market takes the big one.
Avoid high funding rates on the wrong side. If funding is heavily skewed against you, the position is bleeding even without price movement.
Do not add margin to bad theses. Cut. Reset. Re-enter if the thesis still makes sense.

partial liquidation vs full liquidation

Some venues offer partial liquidation, where only enough of your position is closed to restore the maintenance margin requirement. Most arcade-style perps (including the Avantis venue uponly.win routes to) use full liquidation: when you hit the threshold, the whole position closes. For an explainer on max leverage that pairs well with this one, see what is max leverage trading.

where uponly.win fits in

On uponly.win, every position is a real on-chain perp on Avantis. Liquidation logic is a real public smart contract, not a black box the platform controls. The arcade frame is honest about the risk: every position card shows the liquidation price, the leverage, and the side. When you get liquidated, the platform earns zero. We only take a cut on net winnings, so we have zero structural interest in pushing you toward a blow-up.

That is also why the default leverage is 75x and not 500x: the default is the sweet spot for entertainment-grade trading where you can hold a position long enough to feel the move. Higher leverage is available if you know what you are doing. Read is uponly.win actually safe for the full risk frame, and the rip button is at uponly.win.