When does liquidation happen?

According to Binance Futures documentation, when margin balance falls below the required maintenance margin, that is, as the margin ratio approaches 100%.

What is the margin ratio?

Maintenance margin divided by margin balance; the page recommends keeping it below 80%.

Why is the mark price used?

According to Binance, the mark price is derived from funding data and multiple spot exchanges and aims to reduce liquidations caused by brief spikes.

What does the insurance fund do?

If a position goes bankrupt, the Futures Insurance Fund can take it over and absorb the loss; if the fund cannot cover it, ADL steps in.

Leverage, Margin and Liquidation Explained

In short: In futures a position is liquidated when margin balance falls below maintenance margin, and liquidation is tied to the mark price rather than the last price. At 10x leverage a 10% adverse move equals the entire margin.

Last updated: 2026-10-22

What is leverage?

Leverage lets you open a position several times larger than the margin you deposit. For example, with 10x leverage, 100 units of margin open a 1,000-unit position; a 1% move against you costs 10% of the margin and a 10% move costs all of it (before fees and maintenance margin).

Maintenance margin and liquidation

According to Binance Futures documentation, a position is liquidated when margin balance (initial margin plus realized and unrealized PnL) drops below the required maintenance margin^[1]. The margin ratio is maintenance margin divided by margin balance; liquidation happens as it approaches 100% and the page recommends keeping it below 80%^[1]. Rules differ between exchanges; Binance is used here as an example.

Mark price

Liquidation is tied to the mark price, not the last traded price: according to Binance, the mark price is derived from funding data and multiple spot exchanges and is meant to reduce liquidations caused by brief price spikes^[1].

Insurance fund and auto-deleveraging (ADL)

If a position goes bankrupt, the Binance Futures Insurance Fund can take it over at the bankruptcy price and absorb the loss; if the fund cannot cover it, ADL closes the bankrupt position against profitable opposing positions^[1].

Partial liquidation

Binance's 'Smart Liquidation' tries to reduce part of a position instead of closing all of it; if the remaining margin meets the requirement, liquidation stops^[1].

Reducing liquidation risk

Lower leverage, ample free margin, stop-loss orders and sizing positions at a small percentage of the account reduce liquidation risk. In fast markets a triggered stop becomes a market order and can fill away from the stop price^[2], so leave enough room between your stop and the liquidation price.

Disclaimer

Leveraged trading carries a high risk and all margin can be lost. This page is educational, not investment advice.

Frequently asked questions

When does liquidation happen?: According to Binance Futures documentation, when margin balance falls below the required maintenance margin, that is, as the margin ratio approaches 100%^[1].
What is the margin ratio?: Maintenance margin divided by margin balance; the page recommends keeping it below 80%^[1].
Why is the mark price used?: According to Binance, the mark price is derived from funding data and multiple spot exchanges and aims to reduce liquidations caused by brief spikes^[1].
What does the insurance fund do?: If a position goes bankrupt, the Futures Insurance Fund can take it over and absorb the loss; if the fund cannot cover it, ADL steps in^[1].

Related guides

Sources

Binance Futures Liquidation Protocols. Binance Support. Accessed: 2026-10-22.
Stop Orders: Factors to Consider During Volatile Markets. FINRA, 2025. Accessed: 2026-10-22.

Source links were compared with the page content before publication; principles: Editorial Principles