On a leveraged position the venue will close you out if the price moves far enough against you. The price where that happens is the liquidation price. How far away it sits is set by the leverage you choose, at the moment you choose it. That makes it a discipline question before it is a math question.
Leverage as a distance
Higher leverage means less margin behind the position, and less margin means a smaller adverse move uses it up. So each step up in leverage pulls the liquidation price closer to the entry. The exact figure depends on the venue’s margin rules, and it sits closer than the simple arithmetic suggests. Where your liquidation price actually sits works through it.
Compare it with the coin’s normal day
The useful comparison is between that distance and the coin’s ordinary range. If a coin commonly moves further in a day than the distance to your liquidation, then a normal day can end the position. No bad news is needed. The trade is a bet that the usual noise will happen to go your way first.
A liquidation distance several times the daily range is a different position. It can sit through ordinary swings and be wrong only if the idea is wrong.
The stop comes first
A trade has a price where the idea has failed. That is the stop. The liquidation price should be further away than the stop, with room between them. Then the trader exits by choice, at a planned loss. If the liquidation price is nearer than the stop, the venue makes the exit, on its terms, and the plan never gets to run.
Put plainly, the order of events should be: idea fails, stop exits, liquidation never reached. Leverage that reverses the order has replaced a plan with a margin rule.
Wicks reach further than closes
Liquidation is triggered by a price touching a level, however briefly. Crypto produces sharp spikes that reverse within minutes, especially in thin hours. A position can be liquidated by a move that a daily chart barely shows. Venues use a mark price to dampen this, and it reduces the problem without removing it. Crypto liquidation cascades covers how forced exits feed each other.
The distance can shrink while you hold
Funding payments come out of margin on the paying side. Adding to a position can move it into a tier with a lower maximum leverage. Both bring liquidation closer without the price moving. Leverage tiers covers the second. The distance set at entry has to be checked again while the position is open.
What the venue allows is not a suggestion
A venue publishes a maximum leverage for each market. It is a limit the venue is willing to carry. It says nothing about what suits a given coin’s range or a given plan. The disciplined figure comes from the stop and the range, and it is usually far below the maximum.