What 10x Really Means - Leverage And The Distance To Liquidation
At 10x leverage, a 9.5% move against you can end the trade. Here's the simple maths behind liquidation distance, the 0.5% you can't use, and why funding moves the line.
It's a common thing to say, and a reasonable leverage to use. But it's worth knowing exactly what it means: at 10x, a move of about 9.5% against you is enough to start liquidation.
Here's where that number comes from, and how to work it out for any leverage.
First, a quick primer on leverage
Leverage is how large a position is compared with the margin behind it.
- $1,000 of margin behind a $10,000 position is 10x.
- At 10x, a 1% price move is a 10% change in that margin. Gains and losses both scale.
On Everstrike's perpetual futures, the minimum initial margin is 1% of the position, so the highest leverage is 100x.
The two margin numbers
Two numbers decide when a position is in trouble:
- Initial margin - what you put up to open the position. At 10x, that's 10% of its size.
- Maintenance margin - the least margin the position has to keep. On perpetual futures it's 0.5% of the position size, plus the funding rate (counted up to 0.3%).
Liquidation begins when your losses have eaten through the initial margin down to the maintenance margin.
So the distance to liquidation is roughly:
Distance to liquidation = Initial Margin % - Maintenance Margin %At 10x: 10% - 0.5% = 9.5%.
The table
Ignoring funding, here's how far the price can move against you before liquidation begins:
| Leverage | Initial margin | Distance to liquidation |
|---|---|---|
| 2x | 50% | 49.5% |
| 5x | 20% | 19.5% |
| 10x | 10% | 9.5% |
| 20x | 5% | 4.5% |
| 50x | 2% | 1.5% |
| 100x | 1% | 0.5% |
Read the bottom rows twice. At 50x, a 1.5% move - a normal hour for many coins - starts liquidation. At 100x, half a percent does.
Why funding moves the line
The maintenance margin isn't a fixed 0.5%. It's 0.5% plus the funding rate, counted up to 0.3%.
Funding also comes straight out of your margin every hour when you're on the paying side.
So on a long with a high positive funding rate, the liquidation price creeps toward you from both directions:
- your margin shrinks with every hourly payment, and
- the maintenance margin it has to stay above gets bigger.
At 10x with a funding rate of 0.1% an hour, the maintenance margin is 0.6%, and your distance shrinks to about 9.4% - before a single hourly payment has been made. Each payment then takes another 0.1% of the position out of your margin.
Liquidation isn't always all at once
When the Mark Price reaches your liquidation price, Everstrike starts liquidating. Above a minimum size it's incremental - 10% of the position at a time - and that can be enough to restore the margin and end it.
So reaching the liquidation price doesn't necessarily close the whole position. But it does mean you've lost control of the exit.
Note too that liquidation uses the Mark Price, not the last traded price. A single large trade on the order book won't liquidate you; a real move in the market will.
Using the maths
Three habits that follow from the table:
- Pick leverage from your stop, not the other way round. If your stop-loss is 5% away, 20x leaves only 4.5% to liquidation - the stop can't work. 10x leaves 9.5%, comfortably beyond it.
- Leave room for funding. On a position you'll hold for days, assume the distance shrinks.
- Check before you click. The liquidation price calculator gives you the exact number for your entry, size and side.
Wrapping up
- Distance to liquidation ≈ initial margin minus the 0.5% maintenance margin.
- 10x gives about 9.5%; 20x about 4.5%; 50x about 1.5%; 100x about 0.5%.
- Funding raises the maintenance margin and drains margin each hour you pay it.
- Liquidation follows the Mark Price and is incremental above a minimum size.
- Choose leverage so your stop-loss always sits well before your liquidation price.
Find the liquidation price for your trade.