Understanding when your trading position might be liquidated is crucial for managing risk and protecting your capital in cryptocurrency derivatives trading. On platforms like OKX, liquidation occurs based on your margin level, not when your balance hits zero — a common misconception among traders. This article explains how liquidation works, how to estimate your liquidation price, and what risk controls are in place to protect both users and market stability.
How Margin Level Triggers Liquidation
In a unified trading account, the margin level determines whether your open position remains active or gets liquidated. When your margin level drops below 100%, your position becomes subject to partial or full liquidation.
👉 Discover how margin levels work and avoid unexpected liquidations.
Many traders mistakenly believe that liquidation only happens when their equity reaches zero. However, by the time that would occur, significant losses could already destabilize the market. To prevent this, exchanges like OKX initiate liquidation once the margin level falls under 100%, helping maintain system integrity and reduce systemic risk.
When liquidation occurs, a liquidation fee is charged. This fee is added to the platform’s insurance fund, which helps cover any shortfall if the position cannot be closed at the intended price due to extreme volatility.
Partial vs. Full Liquidation: What You Need to Know
Not all liquidations result in a complete closure of your position. Depending on its size and leverage, you may experience:
- Partial liquidation: Only a portion of your position is closed to bring the margin level back into compliance.
- Full liquidation: If partial closure isn’t sufficient to meet margin requirements, the entire position will be closed.
This tiered approach is part of OKX’s advanced risk control protocol. It’s especially effective during high-volatility periods or when large positions are at risk, minimizing sudden market impact and promoting fairer price execution.
If you're holding multiple positions in a unified account, keep in mind that they share collateral. This means the estimated liquidation price shown on tools may differ from the actual liquidation point, as cross-position margins dynamically affect each other.
Estimate Your Liquidation Price with Confidence
To help traders stay ahead, OKX provides a built-in liquidation price calculator located at the bottom of the derivatives trading page. You can input variables such as entry price, leverage, and position size to estimate when your trade might be at risk.
While this tool is highly accurate for single-position accounts, those using a unified account model should be cautious — because all positions share margin resources, the real liquidation threshold can shift based on overall portfolio health.
👉 Use real-time tools to predict your liquidation point before entering a trade.
How Margin Mode Affects Liquidation Calculations
Your chosen margin mode directly influences how margin levels are calculated and when liquidation occurs. Understanding these modes is essential for strategic trading:
1. Single-Currency Margin Mode (Cross Margin)
All positions in the same currency are grouped together and share margin. If one position loses value, it affects the overall margin level of the entire currency portfolio.
👉 Learn how single-currency margin impacts your risk exposure.
2. Multi-Currency Margin Mode (Cross Margin)
Multiple currencies act as shared collateral. This increases flexibility but also interconnects risks across different assets.
3. Isolated Margin Mode (Single or Multi-Currency)
Each position has its own dedicated margin. Losses in one trade won’t directly affect others, offering better risk isolation — ideal for high-leverage strategies.
For detailed guides on how each mode calculates margin:
- Single-Currency & Cross Margin Trading
- Multi-Currency Margin & Cross Margin
- Isolated Margin Mode Overview
Frequently Asked Questions (FAQ)
Q: At what margin level does liquidation start?
A: Liquidation begins when your margin level falls below 100%. It does not wait until your balance reaches zero.
Q: Can I avoid liquidation completely?
A: While you can't eliminate the risk entirely, you can reduce it by using lower leverage, monitoring your margin level closely, and setting stop-loss orders.
Q: Why did only part of my position get liquidated?
A: OKX uses partial liquidation to minimize market impact. If your margin remains insufficient after partial closure, further reductions will occur until requirements are met.
Q: Does having multiple positions change my liquidation price?
A: Yes. In a unified account, all open positions share available margin. Therefore, the actual liquidation price may differ from estimates based on individual trades.
Q: What happens to the liquidation fee?
A: The fee is added to the insurance fund, which covers potential losses from forced liquidations during volatile market conditions.
Q: How is the insurance fund used?
A: If a liquidated position results in a negative balance (i.e., the system incurs a loss), the insurance fund covers the deficit to ensure fairness and solvency.
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Final Thoughts: Stay Informed, Trade Safely
Liquidation is not just a penalty — it’s a critical safety mechanism designed to protect both traders and markets. By understanding how margin levels, position sizing, and account modes influence your risk profile, you can make more informed decisions and avoid unexpected closures.
Always use available tools like the liquidation price calculator, monitor your open positions actively, and consider adjusting your strategy based on current market volatility.
Remember: effective risk management isn't about avoiding losses altogether — it's about controlling them before they control you.
This article is for informational purposes only and does not constitute investment, legal, or tax advice. Digital assets, including stablecoins, carry a high level of risk, may fluctuate significantly, and may lose value entirely. You should carefully consider whether trading or holding digital assets is suitable for you in light of your financial condition. Consult your legal/tax/investment advisor for questions about your specific circumstances. Data provided is for informational use only; no responsibility is accepted for errors or omissions. © 2025 OKX. Reproduction permitted only in full or in extracts up to 100 words with clear attribution.