What determines the liquidation price for a position on KuCoin?

Understanding Liquidation Price in KuCoin Futures Trading

The liquidation price on KuCoin is the price at which a leveraged futures position is automatically closed by the exchange to prevent further losses. This mechanism protects both traders and the exchange from negative equity. When the mark price of a contract reaches the liquidation price, the system triggers a liquidation process, closing the position and deducting funds from the trader’s margin. The exact value of this price depends on several interrelated factors, including leverage level, entry price, position size, maintenance margin, and funding fees.

Each futures contract on KuCoin operates under a margin system, where traders deposit collateral to open leveraged positions. The amount of leverage used directly influences how close the liquidation price is to the entry price. Higher leverage reduces the buffer between entry and liquidation, making positions more vulnerable to market volatility.

Role of Initial and Maintenance Margin

The initial margin is the amount of collateral required to open a leveraged position. It is calculated as the position value divided by the leverage. For example, opening a $10,000 position with 10x leverage requires $1,000 in initial margin. However, liquidation is not triggered when the initial margin is lost. Instead, the maintenance margin—a smaller percentage of the position value—acts as the threshold.

KuCoin sets a maintenance margin rate that varies depending on the contract and leverage tier. If the remaining margin in the position falls below this maintenance level due to adverse price movement, liquidation is initiated. The maintenance margin is typically a small fraction—often between 0.5% and 1%—of the position value. This means that even a small price move against a highly leveraged position can trigger liquidation.

To compute the liquidation price for a long position, the formula is:

• Liquidation Price (Long) = Entry Price × (1 - Initial Margin Rate + Maintenance Margin Rate)

For a short position:

• Liquidation Price (Short) = Entry Price × (1 + Initial Margin Rate - Maintenance Margin Rate)

These formulas assume no funding fees or unrealized PnL impacts, which can slightly alter the actual liquidation price.

Impact of Position Size and Leverage

The position size and leverage are inversely related to the distance between entry and liquidation prices. A larger position size with high leverage reduces the price buffer. For instance, a 100x leveraged long position on KuCoin may have a liquidation price only 1% below the entry price. In contrast, a 5x leveraged position might withstand a 15% adverse move before liquidation.

Traders can adjust their risk by modifying leverage manually. KuCoin allows users to select leverage from 1x up to 100x (depending on the contract). Choosing lower leverage increases the liquidation buffer, providing more room for price fluctuation. This adjustment can be made before opening a position or during an open position, provided the position is not in a liquidation zone.

To change leverage on KuCoin:

• Navigate to the Futures Trading interface
• Select the desired contract (e.g., BTC/USDT)
• Locate the leverage display near the order panel
• Click the leverage value to open the selector
• Choose the new leverage level
• Confirm the change

Note that reducing leverage on an open position may trigger immediate liquidation if the new maintenance margin requirement exceeds available margin.

Mark Price vs. Last Traded Price

KuCoin uses the mark price rather than the last traded price to determine liquidation. The mark price is a fair value estimate derived from the underlying spot price and funding rates, designed to prevent price manipulation during volatile conditions. This ensures that liquidations are not triggered by temporary spikes or wash trades.

The mark price is typically calculated using a price index and a funding rate component. If the last traded price deviates significantly from the mark price, the system still uses the mark price to assess margin levels. This protects traders from unfair liquidations during flash crashes or pump-and-dump scenarios.

For example, if the last traded price of BTC/USDT drops sharply due to a large market sell order, but the mark price remains stable due to the broader spot market, liquidation may not occur. Conversely, if the mark price trends downward over time, even without dramatic trades, it can push the position toward liquidation.

Unrealized PnL and Margin Balance Dynamics

The unrealized profit and loss (PnL) of a position directly affects the available margin. As the mark price moves against a position, unrealized losses accumulate, reducing the equity in the margin account. KuCoin continuously recalculates the margin ratio:

• Margin Ratio = (Wallet Balance + Unrealized PnL) / Maintenance Margin

When this ratio reaches 100%, the position is liquidated. Therefore, the liquidation price is not static—it shifts as funding fees are paid or received and as unrealized PnL fluctuates.

Funding fees, exchanged between long and short holders every 8 hours, can also influence the liquidation price. Long positions pay funding in bullish markets, gradually reducing their margin balance. Over time, this can bring the position closer to liquidation, especially in prolonged trends.

Traders can monitor their estimated liquidation price in real time on the KuCoin trading interface. It is displayed beneath the position details and updates with market movements.

How to Locate and Monitor Liquidation Price on KuCoin

To view the liquidation price for an open position:

• Log in to your KuCoin account
• Go to the Futures section
• Select Positions from the top menu
• Find the active position in the list
• Look for the 'Liq. Price' column

This value is an estimate based on current funding rates and mark price. It may vary slightly at the time of actual liquidation due to price convergence.

Additionally, users can set liquidation price alerts through third-party tools or by manually tracking the price. Some traders use external bots or spreadsheets to calculate real-time liquidation levels based on changing market conditions.

What happens after a position is liquidated on KuCoin?After liquidation, the position is closed at the mark price. The remaining margin, if any, is returned to the wallet. In cases of auto-deleveraging (ADL), the system may close the position and transfer losses to opposing traders if the insurance fund is insufficient.

Can I avoid liquidation by adding more margin?Yes. KuCoin allows margin addition during open positions. Navigate to the position, click 'Add Margin', and transfer additional funds to increase the buffer. This action raises the maintenance margin threshold and pushes the liquidation price further away.

Why does my liquidation price change even when the market is flat?The liquidation price can shift due to funding rate accruals or changes in the maintenance margin rate based on position size tiers. Even without price movement, periodic funding deductions affect the margin balance.

Is the liquidation price the same for all users with the same entry and leverage?Not necessarily. Differences in account balance, position size, and leverage tier can lead to slightly different liquidation prices. The maintenance margin rate may vary based on the total risk exposure, affecting the calculation.