How is the liquidation price calculated on Binance Futures?

Understanding Liquidation in Binance Futures

In Binance Futures, liquidation occurs when a trader’s margin is no longer sufficient to maintain their leveraged position. This mechanism protects both the trader and the exchange from further losses. The liquidation price is the market price at which this automatic closure of the position takes place. It varies depending on the leverage used, the position size, and the initial margin. Understanding how this price is calculated is essential for risk management. Traders must monitor their maintenance margin levels, which is the minimum amount of margin required to keep a position open. If the mark price of the asset reaches the liquidation price, Binance automatically closes the position to prevent further losses.

Key Variables in Liquidation Price Calculation

The calculation of the liquidation price involves several core components:

• Entry Price: The price at which the futures contract was opened.
• Leverage: The multiplier applied to the initial margin to increase exposure.
• Position Size: The total value of the position in the base asset (e.g., BTC).
• Initial Margin: The amount of collateral deposited to open the position.
• Maintenance Margin: The minimum margin required to keep the position active.
• Mark Price: Binance uses the mark price, not the last traded price, to calculate liquidation. This prevents manipulation and ensures fairness.

The mark price is derived from the underlying spot price and funding rate, making it more reliable than the last traded price. The liquidation engine continuously compares the margin ratio (equity / maintenance margin) against the threshold. When this ratio drops to 100%, liquidation is triggered.

Formula for Long Positions

For a long position, the liquidation price is calculated using the following logic:

• The liquidation occurs when the mark price falls to a level where the equity in the position equals the maintenance margin.

• The formula for a long position is:

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

Alternatively, it can be expressed as:

Liquidation Price (Long) = Entry Price × (1 - 1/Leverage + Maintenance Margin Rate)

For example, if a trader opens a long position on BTC/USDT at $30,000 with 10x leverage, the initial margin rate is 10%. Assuming the maintenance margin rate is 0.5%, the liquidation price becomes:

$30,000 × (1 - 0.10 + 0.005) = $30,000 × 0.905 = $27,150

This means if the mark price of BTC reaches $27,150, the position will be liquidated.

Formula for Short Positions

For a short position, the liquidation price increases as the market price rises. The formula differs slightly:

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

Or equivalently:

Liquidation Price (Short) = Entry Price × (1 + 1/Leverage - Maintenance Margin Rate)

Using the same parameters—entry price of $30,000, 10x leverage, and 0.5% maintenance margin—the liquidation price for a short is:

$30,000 × (1 + 0.10 - 0.005) = $30,000 × 1.095 = $32,850

Thus, if the mark price climbs to $32,850, the short position will be liquidated. It’s crucial to note that higher leverage reduces the distance between the entry price and liquidation price, increasing the risk of early liquidation.

Step-by-Step Manual Calculation Example

To manually verify the liquidation price on Binance Futures, follow these steps:

• Determine the position type (long or short).
• Note the entry price from your order history.
• Identify the leverage used (e.g., 20x, 50x).
• Calculate the initial margin rate as 1 / leverage.
• Find the maintenance margin rate from Binance’s margin requirements table (varies by symbol and size).
• Apply the appropriate formula based on position direction.
• Compare the result with the liquidation price shown in the Binance interface.

For instance, with a 25x long position on ETH at $2,000:

• Initial margin rate = 1/25 = 4%
• Maintenance margin rate for ETH is 0.5%
• Liquidation Price = $2,000 × (1 - 0.04 + 0.005) = $2,000 × 0.965 = $1,930

This calculated value should match the one displayed in your Binance Futures dashboard under the position details.

How Binance Displays and Updates Liquidation Price

Binance Futures provides real-time visibility of the liquidation price in the position panel. This value is dynamically updated based on changes in the mark price, funding fees, and unrealized PnL. The platform uses a countdown mechanism when the position nears liquidation. If the margin ratio approaches 100%, a warning appears. The auto-deleveraging system (ADL) may activate if the insurance fund is insufficient. Traders can adjust their leverage or add margin to move the liquidation price further from the current market price. Reducing leverage increases the buffer, while increasing position size without adding margin brings liquidation closer.

Adjusting Isolated vs Cross Margin Modes

The method of margin allocation affects liquidation price calculation:

• In Isolated Margin Mode, the liquidation price depends only on the allocated margin for that position. Increasing the margin manually lowers the risk and pushes the liquidation price further away.
• In Cross Margin Mode, the entire wallet balance acts as collateral. The liquidation price is recalculated continuously as the account equity fluctuates with other positions.

To adjust margin mode:

• Open the futures dashboard on Binance.
• Locate the position in question.
• Click the 'Margin' button next to the position.
• Choose between Isolated and Cross.
• If in isolated mode, use the 'Add Margin' or 'Reduce Margin' options to directly influence the liquidation threshold.

Each adjustment updates the liquidation price instantly in the interface.

Frequently Asked Questions

Why does my liquidation price change even when the market is not moving?The liquidation price can shift due to changes in the mark price, which is influenced by funding rates and the spot index. Even if the last traded price is stable, the mark price may drift slightly, causing recalculations. Additionally, funding fee deductions reduce your position equity, which can move the liquidation price closer.

Can I receive a notification before liquidation?Yes, Binance offers liquidation alerts. You can enable price alerts in the app or website. Set a custom alert slightly above the liquidation price for shorts or below for longs. Additionally, the platform displays visual warnings when the margin ratio drops below 20%.

Does increasing my leverage always move the liquidation price closer?Yes, increasing leverage reduces the initial margin rate, which tightens the buffer between entry and liquidation price. For example, switching from 10x to 50x leverage on the same position significantly reduces the price movement needed to trigger liquidation.

What happens to my funds after liquidation?After liquidation, your position is closed at the mark price. You lose the initial margin, but Binance aims to return any remaining balance after covering losses. If the insurance fund covers part of the loss, you might retain a small amount. However, in extreme cases, the entire margin can be lost.