After opening a futures position, the app shows an “estimated liquidation price.” Where does this number come from?
【A simplified calculation】Take a 10x long position, for example: 100 USDT in capital, with a 1,000 USDT position. When losses eat into your mar
gin (after deducting the maintenance margin requirement), liquidation is triggered. Roughly speaking, in cross margin mode,
Liquidation distance ≈ 1 / leverage. 10x ≈ 10% against your position, 5x ≈ 20%, 20x ≈ 5%.
【Why do price wicks happen?】During major volatility, many traders get liquidated at once. Liquidation orders flood the market and push prices down further,
triggering a cascade of liquidations—that’s why sharp drops often come with long wicks. If your stop-loss is set where everyone else’s is,
If they're all placed at the same levels, they'll get swept up along with those liquidation orders.
【Practical takeaways】1. The higher the leverage, the closer the liquidation price is to the current price—just a small move can knock you out;
2. Always set your stop-loss before your liquidation price. Otherwise, you won't even get the chance to admit you were wrong;
3. Don't rush to buy the dip when you see a long lower wick—it could be someone else's liquidation playing out right in front of you.
What do you think? Share your experiences in the comments.