Liquidation Price Calculator

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What Is the Liquidation Price?

The liquidation price is the price at which the broker forcibly closes out a trader's position to prevent further losses. First, there's usually a warning in the form of a margin call to deposit more funds that haven't been met. The broker determines the threshold before a client begins trading in a margin account.

Key Takeaways

  • The liquidation level, normally expressed as a percentage, is the point that, once reached, will start the automatic closure of positions.
  • The liquidation level is usually predetermined by the brokerage firm.
  • Liquidation levels are typically associated with margin accounts for foreign exchange (forex) and cryptocurrency trading, but they apply to any securities traded on margin, including stocks and other securities.
  • The liquidation level is a fail-safe or risk management feature that protects traders and dealers from taking on significant losses beyond a specific point.

Learn more at Investopedia