A liquidation price is the price level at which a position is expected to breach the applicable margin threshold under stated assumptions. On some isolated-margin systems it is a direct trigger; in account-based systems the displayed value may only estimate one position’s contribution to broader risk.
What determines the level
Inputs can include entry price, position size, leverage, allocated collateral, maintenance requirements and estimated closing fees. Funding payments, added margin or changes in collateral value can move the level. Cross-margin estimates can also change because of other positions or withdrawals.
The relevant observed price is often the mark price rather than the latest trade. A chart showing only last trades may therefore appear not to touch a liquidation level even when the risk trigger is reached.
Three prices with different roles
The liquidation price is not necessarily the execution price. It is also distinct from a bankruptcy price, which describes a zero-equity boundary under a particular calculation.
A rough “one divided by leverage” price-distance shortcut ignores maintenance margin and other inputs. It should not replace the product’s actual calculation. Stop orders and displayed estimates cannot guarantee an exit before liquidation during fast or discontinuous markets.