How Is the Liquidation Price Generated?

In futures trading, the liquidation price is one of the key risk indicators that users should pay close attention to.

When position losses increase and the margin is no longer sufficient to meet the risk requirements of the current position, the system may trigger the liquidation process. 100X futures use a tiered liquidation mechanism, where the system handles position risk based on the actual risk level to help reduce overall position risk as much as possible.

Simply put:

Liquidation Price = A risk reference price when the position risk approaches the system’s liquidation conditions.

Forced liquidation refers to the risk handling process carried out by the system according to platform rules when a user’s position risk becomes too high and the margin is insufficient to maintain the current position.

100X futures use a tiered liquidation mechanism. When a position triggers risk conditions, the system does not necessarily close the entire position immediately. Instead, it may first reduce the position risk in stages based on the actual risk situation.

For example:

A user holds a BTC long position. If the BTC price continues to fall, the position loss will continue to increase.

When the position margin is no longer sufficient to meet the maintenance requirement, the system may trigger the tiered liquidation process and, depending on the actual risk level, partially reduce the position or take further risk control actions.

The purpose of liquidation is to control position risk and prevent losses from expanding further.

The liquidation price is a risk reference price calculated by the system based on the user’s current position information.

When the market price reaches or approaches the liquidation price, it means the position risk is already relatively high, and users should pay close attention to the position status.

The liquidation price is usually affected by factors such as:

Entry price;
Position direction;
Leverage;
Margin mode;
Position margin;
Position size;
Maintenance margin requirement;
Funding fees, trading fees, and other related fees.

The liquidation price may vary for different positions. The actual value shall be subject to the display on the 100X App.

The tiered liquidation mechanism means that the system handles position risk in stages according to the risk level of the position.

When a position triggers liquidation conditions, the system will first try to reduce position risk, such as by partially reducing the position, so that the position risk may return to a relatively safer level.

If the position risk remains too high after partial reduction, the system may continue with further risk handling according to the rules.

Simply put:

Tiered Liquidation = The system does not necessarily close the entire position at once, but handles the position in stages based on the risk situation.

This mechanism may reduce the impact of one-time full liquidation on the user’s position to a certain extent, but it does not mean losses can be avoided or liquidation risk can be completely prevented.

When users open a long position, they expect the price to rise.

If the price rises, the position may generate profit;
If the price falls, the position will generate loss.

Therefore, the liquidation risk of a long position usually comes from price declines.

For example:

A user opens a long position when the BTC price is 100,000 USDT.

If BTC continues to fall, the position loss will continue to increase.

When the loss reaches the system’s risk control conditions, the position may enter the tiered liquidation process.

Simply put:

Long positions are exposed to downside risk. The closer the price gets to the liquidation price, the higher the risk.

When users open a short position, they expect the price to fall.

If the price falls, the position may generate profit;
If the price rises, the position will generate loss.

Therefore, the liquidation risk of a short position usually comes from price increases.

For example:

A user opens a short position when the BTC price is 100,000 USDT.

If BTC continues to rise, the position loss will continue to increase.

When the loss reaches the system’s risk control conditions, the position may enter the tiered liquidation process.

Simply put:

Short positions are exposed to upside risk. The closer the price gets to the liquidation price, the higher the risk.

The higher the leverage, the less margin the user uses relative to the position size, and the more sensitive the position becomes to price movements.

For the same position size:

The higher the leverage, the closer the liquidation price is usually to the entry price.
​The lower the leverage, the more price movement buffer the position usually has.

For example:

For the same BTC long position, if higher leverage is used, a small price drop may bring the position close to the liquidation price.

If lower leverage is used, the position can usually withstand greater price fluctuations.

Therefore, users should not only focus on the position size increased by leverage, but also pay attention to changes in the liquidation price.

Margin is an important funding basis for maintaining a position.

Under Isolated Margin mode, users may add margin according to page rules. After margin is added, position risk may decrease, and the liquidation price may also change.

Under Cross Margin mode, the position may use the available balance in the futures account as a risk buffer, but this also means that more funds in the account may be affected.

Users should manage margin reasonably based on their own risk tolerance to avoid triggering the liquidation process due to insufficient margin.

The liquidation price is not always fixed.

During the holding period, the following situations may affect the liquidation price:

The user adds or reduces margin;
The user adjusts leverage;
The position size changes;
Funding fees are generated or deducted;
Trading fees and other fees change;
The available account balance changes;
System risk parameters are adjusted.

Therefore, users should continue to monitor the liquidation price shown on the page during the holding period, instead of only checking the liquidation price at the time of opening the position.

Users can reduce liquidation risk through the following methods:

Choose leverage reasonably;
Avoid full-position trading;
Control the size of each position;
Set stop loss in time;
Add margin when risk increases if needed;
Avoid using excessive leverage during extreme market volatility;
Continue monitoring mark price, liquidation price, and margin changes.

The tiered liquidation mechanism helps the system handle risk in stages, but it cannot completely prevent losses. Users still need to actively manage positions and control risk.

In futures trading, liquidation usually does not rely only on the latest traded price. Instead, it refers to the price standard used in the system rules, such as the mark price.

The mark price can reduce the impact of short-term abnormal trades on liquidation judgment, making liquidation assessment closer to the fair market price.

Therefore, when checking position risk, users should not only pay attention to the latest price, but also focus on the distance between the mark price and the liquidation price.

The liquidation price is only an important reference for position risk. It does not mean that users will receive an ideal execution result at that price.

100X futures use a tiered liquidation mechanism, but tiered liquidation does not mean there will be no losses, nor does it mean the position will never be fully closed. If the market continues to move unfavorably, the system may continue to reduce or close the position based on the actual risk situation.

During fast market movements, insufficient market depth, or extreme market conditions, liquidation triggers and final execution results may be affected by market conditions. The actual result shall be subject to the system’s execution.

Futures trading is a high-risk trading product. Users should set leverage reasonably, control position size, monitor margin changes, and trade according to their own risk tolerance.