> For the complete documentation index, see [llms.txt](https://cadenceprotocol.gitbook.io/cadence-protocol/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://cadenceprotocol.gitbook.io/cadence-protocol/cadence-perpetuals/leverage-trading/liquidation.md). # Liquidation ## **Liquidation Basics** Liquidation levels are a crucial aspect of crypto leverage trading that every trader needs to understand. When a trader takes a leveraged position, they borrow funds from the exchange to increase their buying power and potential profits. However, this also increases their risk exposure, as the potential losses are amplified along with the leverage. To mitigate this risk, exchanges set liquidation levels, which are predetermined price levels at which a trader's position will be automatically closed, or liquidated, to cover their losses. For example, if a trader enters a long position on CANTO with 10x leverage and the liquidation level is set at $0.12, their position will be liquidated if the CANTO price falls below that level. Suppose the CANTO price drops to $0.108. In that case, the trader's position will be liquidated, and they will lose the funds they had invested in the trade, which may even exceed their initial investment due to the use of leverage. Traders need to be aware of liquidation levels and use them to manage their risk effectively. ## **Partial Liquidations** For example, if only 350 USD worth of tokens is used as collateral to open the position, there will be a price at which the loss amount is very close to the collateral amount. This is the Liquidation Price and is calculated as the price at which the (collateral - losses - borrow fee) is less than 1% of your position's size. If the token's price crosses this point then the position will be automatically closed. Due to the borrow fee, your liquidation price will change over time, especially if you use a leverage that is more than 10x and have the position open for more than a few days, so it is important to monitor your liquidation price. If there is any collateral remaining after deducting losses and fees, then the corresponding amount would be returned to your account. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://cadenceprotocol.gitbook.io/cadence-protocol/cadence-perpetuals/leverage-trading/liquidation.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.