Liquidation

Liquidation is what happens when a leveraged position loses enough money that the exchange force-closes it to protect both the trader and the platform from negative-balance risk. On Hex37, liquidation triggers when your margin balance drops to 1% of position notional (the maintenance margin). The exchange closes the position at market with adverse slippage, deducts a 0.5% liquidation fee, and returns whatever (if anything) is left of your posted margin to your balance.

Why liquidation exists

Leverage lets a small amount of margin control a much larger position. A 10x long means $100 of margin controls $1,000 of exposure. If the price moves against the long by 10%, the position has lost $100, the entire posted margin. Without an automatic close-out, your account would go negative and either the platform or the funding pool that backs other positions would have to absorb the loss. Liquidation is the exchange's mechanism for closing the position before that happens. Every margin-trading venue has one.

How the liquidation price is calculated

Your liquidation price is the price at which your margin would fall to maintenance margin (1% of notional on Hex37). For an isolated-margin long at 10x leverage, the liquidation price sits roughly 9% below entry. At 20x leverage, it sits roughly 4.5% below entry. At 50x or 100x leverage (which Hex37 caps at 20x for safety reasons), the liquidation price is so close to entry that any normal volatility liquidates you. The Hex37 position sizer shows your liquidation price in real time as you adjust leverage and stop placement.

What liquidation looks like on Hex37

When a position hits maintenance margin, the simulator runs the same sequence a real exchange runs: the engine fires a market order to close at the best available bid (for a long) or ask (for a short), applies the adverse slippage that real liquidations include, deducts the 0.5% liquidation fee, and writes the receipt to the journal. You see the trigger price (where margin crossed maintenance), the executed close price (worse than the trigger due to slippage), the fee, and the resulting PnL. The whole thing usually happens faster than the chart can update, which is part of the lesson.

How to avoid liquidation

• Use isolated margin while learning so one losing position cannot drain the rest of your balance.
• Keep leverage low enough that your stop-loss triggers well before the liquidation price.
• Size each position so 1% account risk is the cap, regardless of conviction.
• Treat the liquidation engine as a backstop you never want to touch, not as a stop-loss alternative.
• Use bracket orders so a take-profit and stop-loss attach to the entry automatically and survive disconnections.