# Leverage, Margin and Liquidation Explained

> 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 · https://www.nx24.ai/en/rehber/kaldirac-teminat-tasfiye

## 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].

## Sources

1. [Binance Futures Liquidation Protocols](https://www.binance.com/en/support/faq/binance-futures-liquidation-protocols-360033525271). Binance Support. Accessed: 2026-10-22.
2. [Stop Orders: Factors to Consider During Volatile Markets](https://www.finra.org/investors/insights/stop-orders-factors-consider-during-volatile-markets). FINRA, 2025. Accessed: 2026-10-22.

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Not investment advice. NX24 — https://www.nx24.ai/