A liquidation price is the price at which the exchange closes your position for you. Work backwards from your stop-loss line, and the liquidation price and the lot size come out of one calculation.
Choose a lot without thinking about liquidation and it can arrive much sooner than you expected. Start from the liquidation price instead, and the most a single trade can cost is visible first.
This article is for people who trade crypto perpetual futures with margin. It is based on the liquidation formula in Hyperliquid’s public documentation, and describes things as of 25 September 2026.
By the end you will know four things:
- why the liquidation price is worth deciding before you open a trade
- how a liquidation price differs from a stop-loss line
- what the liquidation price depends on
- how to work out a lot size from the liquidation price you want
Why decide the liquidation price first?
A liquidation price exists whether you decide it or not. It is set by how large a lot you open against the margin you put in, so every position has one from the moment it opens.
A worked example: 500 USDC of margin, a long at 100 and a maintenance rate of 5%. With a lot of 20.8, the liquidation price is about 80. Open 50 units instead and it moves to about 94.7, only around 5% below the entry.
So not deciding still decides it. It just decides it without anyone looking.
Liquidation closes the position using the exchange’s formula, not at a price you chose. With the 20.8 lot, a fall to 80 is a loss of about 416 USDC, more than 80% of the 500 USDC margin.
Under cross margin, it can also eat into the margin behind your other positions.
Deciding it first lets you do three things:
- keep the liquidation price beyond your stop-loss line, so your own stop acts first
- know the most you can lose before you open the trade
- size the lot from the liquidation price rather than from a leverage number
An ordinary move, about the size of the coin’s daily range, can reach a liquidation price that sits too close. Being right about the direction does not help if the position is closed on the way.
The question is not only “will it go my way?” but also “can the position survive the moves before it gets there?”
A liquidation price and a stop-loss line are different things
A stop-loss line is a price you choose yourself: if the market reaches it, you close the position. It is how you decide, in advance, how much a single trade is allowed to cost.
A liquidation price is set by the exchange’s rules. When your margin shrinks to the maintenance margin, the exchange closes the position, whatever you had planned.
The order matters. The stop-loss line comes first, and the liquidation price sits beyond it. Your own stop is meant to act first; liquidation is the last safety net, placed further away.
If the two are the other way round, the exchange closes the position before your plan ever gets a chance to, and the loss is decided by the venue’s formula rather than by you.
As the figure shows, the distance from the entry to the stop-loss line is the loss you choose, and the distance from the stop-loss line to the liquidation price is the buffer.
What the liquidation price depends on
Liquidation happens when your margin plus the unrealised profit or loss of the position falls below the maintenance margin.
Four things decide where that point is: the margin, the entry price, the lot size and the maintenance margin rate.
The maintenance margin rate is fixed per coin. On Hyperliquid it is half of the margin required at that coin’s maximum leverage, so a coin with a maximum of 10x has a maintenance rate of 5%.
Running that condition backwards gives the lot size directly:
Lot = margin / (distance from entry to liquidation + liquidation price x maintenance rate)
For a short, the prices are simply mirrored: the liquidation price is above the entry, and the distance is measured upwards. The idea is otherwise identical.
More margin, or a smaller lot, puts the liquidation price further from the entry. Keep the margin the same and add to the lot, and the liquidation price moves towards the entry.
Notice what is missing from the formula: the leverage setting. Leverage is not an input you choose here; it is a result of how large a position you open against the margin you put in.
Tip 1: decide the stop-loss line first
The first number to fix is not the liquidation price but the stop-loss line.
It can come from a level on the chart that would tell you the idea behind the trade was wrong, or from the amount you are prepared to lose on one trade.
As an example, say you open a long at 100 and decide that you will close it if the price falls to 88.
The liquidation price then belongs below 88. It is the line that only matters if the stop-loss did not close the position, so it has no business sitting above it.
Deciding in this order keeps the loss in your hands. The liquidation price becomes a constraint you check, not the number that decides how much you lose.
Tip 2: leave a buffer between the stop and liquidation
When the market moves fast, a stop-loss order can fill at a worse price than the one you set.
The gap between the price you asked for and the price you got is slippage, and it is largest exactly when you need the stop most.
Fees and funding payments also take a little from your margin over time. Less margin means the liquidation price moves closer to your entry, even if the market has not moved.
If the liquidation price sits right next to the stop-loss line, a fast move can go through both, and the position is liquidated before the stop has done its job.
How wide the buffer should be depends on how much the coin usually moves. The more volatile the coin, the wider the gap you leave.
A buffer that is comfortable for a large, heavily traded coin may be far too thin for a small one.
If you want a number, look at the coin’s range over a day, the gap between its daily high and low. A buffer narrower than that range can be crossed, stop and liquidation together, within a single day.
Tip 3: size the position from the liquidation price, not from leverage
Here is a worked example. You have 500 USDC of margin, you open a long at 100 on a coin with a maximum leverage of 10x (a maintenance rate of 5%), and you want the liquidation price to be 80.
The position is worth about 2,080 USDC, which works out at roughly 4.2x leverage. Move the liquidation price closer, to 90, and the same margin supports about 34.4 units, or roughly 6.9x.
If the stop-loss at 88 closes the position, the loss is 20.8 x 12, about 250 USDC.
This is also the moment to ask whether losing that amount on one trade is acceptable. If it is not, reduce the lot, and the liquidation price moves further away as a result.
Starting from a leverage number hides where the liquidation price will land. Starting from the liquidation price gives you the lot and the leverage together, and you can see the loss at the stop before you open anything.
Tip 4: with cross margin, the liquidation price keeps moving
Under cross margin, all your positions share the margin in the account. The liquidation price of any one position depends on the state of the whole account, not only on that position.
- adding to a position in the same coin pulls its liquidation price towards the entry
- a growing unrealised loss on another position pulls it closer too
- withdrawing margin pulls it closer, and depositing pushes it further away
The formula above gives the value for a position held with only the margin you put in, which is the same as isolated margin.
With cross margin, check the liquidation price on the exchange’s screen again every time you add to a position. Before a withdrawal, look first at where the remaining positions’ liquidation prices will go.
The order to decide in, in four steps
- decide the stop-loss line, from a chart level or the amount one trade may lose
- leave a buffer beyond it and set the liquidation price there
- work out the lot from the margin and the liquidation price with the formula
- work out the loss if the stop closes the trade, and reduce the lot if it is too large
Reducing the lot moves the liquidation price away from the entry. Going back from step 4 to step 2 only ever widens the buffer, never narrows it.
Frequently asked questions
Q. Can I use the liquidation price as my stop-loss?
It is not a good substitute. Liquidation happens only once the margin has fallen to the maintenance level, so the loss by then is large. The stop-loss line is the tool that lets you choose the size of the loss.
Q. How does this work for a short?
Everything is mirrored: the stop-loss line and the liquidation price are above the entry. With 500 USDC of margin, an entry of 100 and a liquidation price of 120, the lot is 500 / (20 + 6), about 19.2.
Q. Why does my calculation differ from the exchange’s figure?
Fees, slippage, funding payments and, under cross margin, your other positions all move the real figure. On some coins the maintenance rate also steps up for large positions.
Summary
- decide the stop-loss line first and keep the liquidation price beyond it
- leave a buffer between the two for slippage, fees and funding
- lot = margin / (entry-to-liquidation distance + liquidation price x maintenance rate)
- under cross margin, recheck the liquidation price each time you add to a position
💡 To work out a lot size from a liquidation price
The liquidation price screen in Hype Trade takes a coin, a side, a liquidation price and a margin amount, and returns the lot size using the formula in this article (as of 25 September 2026).
This article explains a way of calculating, not advice to buy or sell. All figures are worked examples. Fees and maintenance rates differ by exchange and by coin.
Categories