Definition
A liquidation price is the estimated mark price at which a leveraged position or margin account would fall below its maintenance requirement and become eligible for liquidation.
Why the displayed price can move
The estimate depends on the venue's formula and current account state. Inputs can include entry price, position size, available margin, maintenance margin tier, funding payments, collateral value and unrealized profit or loss from other cross-margined positions.
Adding margin, reducing a position or changing another position in the same margin account can move the estimate.
Trigger price and execution price
The liquidation price indicates a risk boundary. It does not promise that the position will close at that exact price. Once liquidation begins, the venue must execute against available liquidity, and the resulting fills can occur at different prices.
Fast changes in the mark price can also cause liquidation to trigger beyond the previously displayed estimate.
What it does not mean
Liquidation price is an estimated price level. Liquidation threshold is the underlying maintenance condition, while liquidation is the process used after that condition is breached.
Where this term fits
Questions about liquidation price
- Is a liquidation price fixed when a position opens?
- No. Funding, margin transfers, position changes and cross-account profit or loss can change it.
- Does the market have to trade at the liquidation price?
- Not necessarily. Venues commonly trigger liquidation using the mark price, which can differ from the latest trade.
- Is liquidation price the same as a stop-loss price?
- No. A stop-loss price is selected as an order trigger. The venue calculates liquidation price from its margin rules and the account state.
See these concepts in context
Review the Fensory MCP connection, tools and account controls.