What Is the ‘Liquidation Price’ and How Is It Calculated in a Leveraged Position?
The liquidation price is the specific price point at which a leveraged position will be automatically closed by the exchange to prevent the trader's account balance from falling below the required maintenance margin. It is calculated based on the initial margin, the maintenance margin rate, the leverage used, and the current price of the asset.
The closer the position's entry price is to the liquidation price, the higher the risk of being wiped out.
