A liquidation event occurs when your account’s collateral (equity) falls to or below the required maintenance margin. The margin ratio measures how close your equity is to this level, and positions are subject to liquidation when the margin ratio reaches the liquidation threshold (1.0).
Margin ratio
Your margin ratio shows how far your equity is from liquidation.
We compare your equity (available margin + used margin) to the two key margin levels on your account:
- Initial Margin (IM) – The minimum amount of collateral required to open a leveraged position.
- Maintenance Margin (MM) – The minimum amount of collateral that must be maintained to keep a position open; falling below this may trigger liquidation.
The formula is:
Margin ratio = 1 + (Equity − Maintenance Margin) / (Initial Margin − Maintenance Margin)
How to read this number:
- Margin ratio = 1.0 → your equity is exactly at maintenance margin (liquidation point).
- 1.0 < Margin ratio < 2.0 → your equity is between maintenance and initial margin; risk is elevated.
- Margin ratio = 2.0 → your equity is exactly at initial margin.
- Margin ratio > 2.0 → your equity sits comfortably above initial margin; the higher the number, the larger your buffer from liquidation.
Worked examples – how FX, margin ratio and liquidation behave
Because your main account uses cross-margin, all eligible collateral (EUR, GBP and USD) is first converted into USD using the latest FX rates. Your equity in USD is then used for all margin calculations.
Note: If FX rates move, your EUR/GBP balances will be reconverted into USD at the new rates, which can slightly change your equity and margin ratio even if your crypto positions don’t move.
Step 1 – Convert collateral to USD
Assume you have:
- 5,000 EUR
- 4,500 USD
- FX rate: EUR → USD = 1.10
- Your equity in USD is:
- EUR part: 5,000 × 1.10 x 0.99 = 5,445 USD
- USD part: 4,500 USD
- Total equity = 5,500 + 4,500 =9,945 USD
This $9,945 is the starting equity we use in the examples below.
Note: On eligible collateral other than USD you can use 99% of the USD value to open a position.
Step 2 – Position and margin parameters
Now you open a 0.5 BTC long position:
- Position size: 0.5 BTC (long)
- Entry price: $90,000
- Position value (notional): 0.5 × $90,000 = $45,000
- Initial Margin (IM): $4,500 (10% of notional)
- Maintenance Margin (MM): $2,475 (5.5% of notional)
- Starting equity (in USD): $10,000 (from the FX conversion above)
We use:
- Unrealised PnL (long) = (Current price − Entry price) × 0.5 BTC
- Equity = Available margin + Used margin
- Margin ratio = 1 + (Equity − MM) / (IM − MM)
- Derisk level: Margin ratio ≤ 1.40
- Liquidation level: Margin ratio ≤ 1.00
Example 1 – Long 0.5 BTC, price goes down
| BTC price | Realised PnL | Equity | Margin ratio | Status |
| $90,000 | $0 | $10,000 | 4.72 | Very healthy – far above IM |
| $85,000 | −$2,500 | $7,500 | 3.48 | Healthy – good buffer |
| $80,000 | −$5,000 | $5,000 | 2.25 | Still above IM, but risk higher |
| $76,570 | −$6,715 | $3,285 | 1.40 | Derisk Mode – close to liquidation, warnings sent |
| $74,950 | −$7,525 | $2,475 | 1.00 | Liquidation level – equity = MM; liquidation engine starts closing the position |
| $70,000 | −$10,000 | $0 | < 1.00 | Without liquidation, equity would fall below MM and could become negative. In practice, the engine starts closing the position before this |
Therefore, for this long position:
- Derisk triggers at ~$76,570.
- Liquidation triggers at ~$74,950.
Example 2 – Short 0.5 BTC, price goes up
Now take the same parameters but with a short position (you sell 0.5 BTC at $90,000).
Unrealised PnL (short) = (Entry price − Current price) × 0.5 BTC
Equity and margin ratio are computed exactly the same way as above.
| BTC price | Realised PnL | Equity | Margin ratio | Status |
| $90,000 | $0 | $10,000 | 4.72 | Very healthy |
| $95,000 | −$2,500 | $7,500 | 3.48 | Healthy – good buffer |
| $100,000 | −$5,000 | $5,000 | 2.25 | Still above IM |
| $103,430 | −$6,715 | $3,285 | 1.40 | Derisk Mode – close to liquidation |
| $105,050 | −$7,525 | $2,475 | 1.00 | Liquidation level – liquidation engine starts closing the short |
| $110,000 | −$10,000 | $0 | < 1.00 | Without liquidation, equity would fall below MM; the engine intervenes earlier |
Therefore, for this short position:
- Derisk triggers at ~$103,430.
- Liquidation triggers at ~$105,050.
How to read these examples
- When margin ratio > 2.0, your equity is above the Initial Margin requirement – you have a good buffer.
- When 1.0 < margin ratio ≤ 2.0, equity is between Maintenance and Initial margin – risk is elevated.
- When margin ratio ≤ 1.0, your equity is at or below Maintenance Margin – the liquidation engine will reduce or close positions to prevent negative equity.
Note: The execution price can be worse the moment liquidation starts and there are also costs involved.
What is Derisk Mode?
Derisk Mode is an early warning we use before liquidation. When your margin ratio goes below 1.4 the risk engine automatically puts you in derisk mode and sends an email so you can act.
What can I do in Derisk Mode?
- Add collateral (transfer cash to the sub‑account).
- Reduce position size (partially close).
How to avoid liquidation
- Monitor margin ratio and maintenance margin in real time.
- Use conservative leverage. Higher leverage means smaller adverse moves can push Equity below Maintenance Margin.
- Set stop‑losses and make sure you check the emails we send about derisk mode.
FAQ
Why was my position liquidated even though I still had margin available?
Liquidations are based on maintenance margin requirements not available margin. Your position gets liquidated when your equity falls below the maintenance margin, even if you technically still show “available” or “unused” margin elsewhere.
Investing involves risks. The value of investments can go up as well as down and you may receive back less than your original investment or lose your entire investment. Investing with leverage means the value of your investment fluctuates more than the price of the underlying asset. One Trading does not provide investment advice and investors should make their own decisions or seek independent advice.