What Is Estimated Liquidation Price?

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Understanding risk management in derivatives trading is crucial for preserving capital and maximizing long-term success. One of the most important concepts in futures trading—especially within a unified margin system—is the Estimated Liquidation Price (ELP). This value serves as a critical warning signal, indicating the price level at which your position may be forcibly closed due to insufficient margin.

In this guide, we’ll explain what Estimated Liquidation Price means, how it’s calculated, and why it matters for traders using USDT-margined perpetual contracts. We’ll also walk through a real-world example and answer common questions to help you manage risk more effectively.

Understanding Estimated Liquidation Price (ELP)

The Estimated Liquidation Price is the projected market price at which your current USDT-margined perpetual contract position will trigger a forced liquidation under the cross-margin mode. When the mark price of the asset reaches this estimated level, your position is at high risk of being automatically closed by the system to prevent further losses.

BIT displays the ELP for users operating under standard risk settings. You can view this value in two key places:

Liquidation occurs when your total account margin balance falls below the total maintenance margin requirement—that is, when your Maintenance Margin Rate (MM%) reaches or exceeds 100%.

⚠️ Important: If you have any spot liabilities (such as borrowed funds), the system may initiate forced conversions earlier—specifically when your total margin balance drops below 1.1 times the total maintenance margin (i.e., MM% ≥ 90%).

This early intervention helps reduce systemic risk but means you should monitor both your derivatives and spot positions closely.

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When Is the Estimated Liquidation Price Not Shown?

There are cases where the system does not display an Estimated Liquidation Price:

In these scenarios, the likelihood of liquidation is considered extremely low, often due to deep in-the-money positions or very low leverage usage. While this may seem reassuring, traders should never assume immunity from liquidation—especially during periods of high volatility or flash crashes.

How Is Estimated Liquidation Price Calculated?

To understand how ELP works, let’s break down a practical example.

Example Scenario

Suppose a trader holds a long position of 2 BTCUSD perpetual contracts, with the following details:

We want to calculate the Estimated Liquidation Price (ELP) at which this position would be at risk of liquidation.

Step 1: Maximum Loss Capacity

The maximum loss the account can absorb before liquidation is:

Max Loss = Total Margin – Total Maintenance Margin

This also equals:

Max Loss = Position Size × (Mark Price – ELP)

So:

12,000 – Total Maintenance Margin = 2 × (18,000 – ELP)   → [Formula 1]

Step 2: Calculate Maintenance Margin

In this case, since there's only one position, the total maintenance margin equals the maintenance margin of that single position:

Total Maintenance Margin = (1.50% + |2| × 0.015%) × |2| × ELP   → [Formula 2]

Solving both equations simultaneously gives us:

ELP = (18,000 – 12,000 / 2) / [1 – (1.5% + |2| × 0.015%)]
ELP ≈ 12,186.45 USDT

Interpretation

This means the BTCUSD long position will begin to be automatically liquidated if the mark price drops to approximately 12,186.45 USDT.

It’s important to note that this is an estimate. The actual liquidation price may vary slightly due to dynamic market conditions and funding rate adjustments.

Why Does Estimated Liquidation Price Change Over Time?

Under a unified margin model, all positions and liabilities share the same pool of collateral. As a result, your ELP isn't static—it fluctuates based on several factors:

Because ELP depends on real-time account health, it must be monitored continuously—especially when trading multiple assets or using high leverage.

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These terms reflect common queries from traders seeking clarity on derivatives risk controls.

Frequently Asked Questions (FAQ)

Q1: Can I avoid liquidation once my position reaches the Estimated Liquidation Price?

While reaching the ELP triggers the liquidation process, some platforms allow partial closures or auto-deleveraging mechanisms. However, you should not rely on intervention. The best strategy is to add margin or close part of your position proactively before prices approach the ELP.

Q2: Is Estimated Liquidation Price the same as bankruptcy price?

No. The bankruptcy price is the theoretical price at which your entire position loses all margin. The ELP is always further from the current price than the bankruptcy price, accounting for fees and maintenance margins.

Q3: Does leverage affect my Estimated Liquidation Price?

Yes. Higher leverage reduces your margin buffer, bringing the ELP closer to the current market price. Lower leverage increases your safety zone and pushes the ELP further away, reducing liquidation risk.

Q4: Why did my position get liquidated even though the market price didn’t reach the displayed ELP?

This can happen due to rapid price slippage, especially during volatile events. The displayed ELP is an estimate based on current conditions. In fast-moving markets, execution prices may deviate significantly.

Q5: Can I see Estimated Liquidation Price on mobile apps?

Yes, most major trading platforms—including those supporting USDT-margined contracts—display ELP in both desktop and mobile interfaces, typically within the positions tab or order review screen.

Q6: How often is Estimated Liquidation Price updated?

The ELP updates in real time as your account balance, position size, or market price changes. In a unified margin environment, even opening a new unrelated position can shift your ELP due to shared collateral effects.

👉 See how advanced risk tools help prevent unexpected liquidations

Final Thoughts

The Estimated Liquidation Price is more than just a number—it’s a vital component of responsible trading. By understanding how ELP is determined and monitoring it closely, traders can make informed decisions about position sizing, leverage use, and stop-loss placement.

Whether you're new to perpetual contracts or refining your risk strategy, keeping an eye on your ELP helps you stay ahead of adverse market moves and avoid costly surprises.

Remember: successful trading isn’t just about catching trends—it’s about surviving long enough to benefit from them. Proper use of tools like ELP ensures you do exactly that.