2025-11-21 · 8 min read
How Crypto Liquidation Works (and How to Avoid It)
Leverage can multiply your gains, but liquidation can wipe you out. Learn how liquidation works and how to manage your risk.
Liquidation is one of the biggest risks in leveraged crypto trading. When your margin is too low to support an open position, the exchange forcibly closes your trade to prevent further losses.
The idea behind liquidation
When you trade with leverage, you're effectively borrowing money from the exchange. Your own capital (margin) is the safety buffer. If the market moves against you too far, that buffer disappears — and the exchange liquidates your position.
Simple example of liquidation risk
If you open a 10× long position, a roughly 10% move against you could be enough to trigger liquidation, depending on fees and maintenance margin. Higher leverage = smaller move required to liquidate you.
How a liquidation calculator helps
A liquidation calculator lets you see:
- At what price your position would be liquidated
- How changing leverage affects liquidation price
- How much extra margin reduces your risk
You can experiment safely using the SatsTally Liquidation Calculator before opening any real trades.