Simplified liquidation estimate: Understanding a Simplified Liquidation Scenario
The liquidation estimate uses entry price, leverage, maintenance rate and direction in a simplified isolated-position model. It helps illustrate why leverage moves a liquidation boundary closer to entry.
Use the Simplified liquidation estimate Calculator to enter your own figures and compare the result with the worked example below.
Simplified liquidation estimate formula
Long: entry × (1 − 1/leverage)/(1 − maintenance rate). Short: entry × (1 + 1/leverage)/(1 + maintenance rate).
Worked example
| Item | Example value |
|---|---|
| Entry price | 100 USD |
| Leverage | 10 times |
| Maintenance margin rate | 0.5 % |
| Direction (1 long / -1 short) | 1 direction |
| Simplified liquidation estimate | 90.452261 USD |
These are illustrative inputs, not current prices, rates or recommended targets. Where a currency is shown, keep all comparable money amounts in the same currency; conversion examples identify the two sides separately.
How to interpret the result
Venue formulas, collateral, funding, fees and maintenance tiers can change the actual boundary. Do not use this estimate as an exchange liquidation quote.
Related calculations
Method and further reading
The example follows the FinMathly calculator method. For broader background, see Investor.gov: Leveraged investing risks. The background resource may use jurisdiction-specific terms; it does not replace the assumptions of this calculator.
Featured photograph: Pexels.