Liquidation Price Math Explained — Measured (PDF Guide)

You worked out your liquidation price by dividing the entry by your leverage, because that is what every explainer shows. Then the exchange closed you somewhere else, and nobody told you the formula had a term in it you had never seen.

This guide derives the real formula from what liquidation actually is, shows exactly where the missing term comes from, and works it on real numbers at four multipliers. It is arithmetic rather than a measurement, so you can check every line with a pencil. This is a 44-page PDF that teaches Liquidation Price Math from the first thing you see on the screen through to a written strategy with an entry, a stop and an explicit rule for when the trade is wrong.

Nothing is taught underneath a chart. Every label sits on the candle, the line or the level it is describing, on real BTC, ETH, SOL and LINK charts. There are three quizzes on real charts, each followed by the same chart re-shown annotated with the reasoning, plus faded practice pages where the first steps are filled in and you finish the rest.

WHAT'S INSIDE

The real formula, derived rather than quoted -- Entry times one minus one over leverage plus the maintenance rate, for a long. Four lines of algebra, all of them shown.

How wrong the simplified version is -- 5.00 per cent too generous at ten times, 12.50 per cent at twenty-five, 25.00 per cent at fifty and 50.00 per cent at a hundred. The error grows with the multiplier.

What that means in the market's own units -- At a hundred times the real distance is about 0.56 average true ranges rather than 1.12 -- half an ordinary bar rather than a whole one.

What else moves the line -- Fees, funding and added margin all shift it, in named directions, and three of the four move it closer.

How cross margin changes the calculation -- Your spare balance enters the formula as extra margin, which is the entire mechanism guide #65 measures the value of.

WHAT YOU'LL BE ABLE TO DO

Derive the liquidation price rather than looking it up.

Say why the simplified formula fails worst at high leverage.

Find your venue's maintenance margin rate and use it.

Convert the result into average true ranges.

Name the four things that move the line, and which way each goes.

AN HONEST NOTE

Liquidation Price Math is a clue, not a crystal ball. It describes what price has already done. This guide contains no win-rates, no backtest results and no promises about what you will make, because nobody can verify those and you should not trust anyone who prints them. What it hands you instead is a set of rules you can test yourself on TradingView in an afternoon. Educational, not financial advice.

Instant download. 44 pages, PDF.