Spain
Mexico
Brazil
Poland
Taiwan
Philippines
South Korea
The essentials
- Calculate notional exposure and identify the denominator behind the leverage label.
- A 2% adverse move means a 10% or 20% initial-margin loss at 5× or 10×, before costs.
- Liquidation depends on maintenance rules and collateral; 1 ÷ leverage is not a universal trigger.
Separate notional exposure from margin
Notional is the economic size of a position. For a simple linear contract, calculate quantity × contract multiplier × price. Margin is the collateral required to support that exposure. Futures margin supports contractual obligations; a securities margin account instead involves a broker loan. Their financing and account rules differ.
In our hypothetical examples, $1,000 of initial margin supports either $5,000 notional at 5× or $10,000 at 10×. Leverage here means entry notional ÷ initial margin. The examples use linear, dollar-settled long positions with fixed quantities and ignore costs. Inverse contracts and options require their own payoff calculations.
Translate a price move into dollars
For these assumptions, gross profit or loss equals entry notional × percentage price change. A 2% fall therefore loses $100 on the $5,000 position and $200 on the $10,000 position. Dividing by the same $1,000 initial margin produces losses of 10% and 20%, respectively.
The table also shows a 5% move in each direction. These percentages describe returns on initial margin, not necessarily on the entire account. If the account contains other collateral, its percentage result has a different denominator. Current exposure divided by current equity will also change as prices and account equity move.
| Price move, long position | 5×: USD 5,000 notional | 10×: USD 10,000 notional |
|---|---|---|
| +5% | +USD 250 / +25% | +USD 500 / +50% |
| −2% | −USD 100 / −10% | −USD 200 / −20% |
| −5% | −USD 250 / −25% | −USD 500 / −50% |
Calculate liquidation under the actual rules
In a model with no costs or maintenance requirement, an adverse move of 1 ÷ leverage would exhaust initial margin: 20% at 5× or 10% at 10×. That is a zero-equity calculation, not a universal liquidation price. Maintenance requirements can trigger intervention while collateral remains.
Read which price values the position: a mark price can differ from the last trade. Check maintenance tiers and eligible collateral. Isolated margin allocates collateral to one position; cross margin shares a pool. Other positions, collateral changes and account rules can therefore shift the liquidation threshold independently of the leverage shown at entry.
Track costs against the larger exposure
Perpetual funding is a periodic transfer between long and short positions, designed to help align the contract with spot prices. Depending on the applicable rate and side, a position pays or receives it. Trading fees and, where applicable, borrowing charges are separate items. A flat market price does not imply a flat account balance.
For a hypothetical single interval with a payable funding rate of 0.01%, a $10,000 position pays $1: $10,000 × 0.0001. Relative to $1,000 margin, that is 0.1%. This is an invented rate for arithmetic, not a current quote. Check the interval, position valuation, payment sign and timestamp in the funding ledger.
Check how an exit would actually execute
A stop-market order becomes a market order when triggered; a price gap or thin order book can produce a worse fill. A stop-limit order restricts the execution price but may remain unfilled. Neither order turns the simplified leverage calculation into a guaranteed maximum loss or ensures an exit before liquidation.
Before interpreting a position statement, match its contract identifier, multiplier, quantity, entry price, mark price, collateral mode and maintenance requirement. Reconcile realized and unrealized profit, funding, commissions and liquidation charges separately. Read whether extra collateral can be drawn and how any deficit is handled; those terms determine which account funds remain exposed.
Official sources
An explanation of financial mechanics based on official sources. Hypothetical calculations are not actual trading results or forecasts.
Official sources · 9
CFTC — Understand the Risks of Virtual Currency Trading ↗SEC Investor.gov — Understanding Margin Accounts ↗
Coinbase International Exchange — Leverage and Margin Trading Policy ↗
Coinbase Help — International Derivatives Terms and Definitions ↗
Coinbase Help — Margin Types for International Derivatives ↗
CFTC — Crypto Asset Perpetual Contracts ↗
Coinbase — Understanding Funding Rates in Perpetual Futures ↗
SEC Investor.gov — Understanding Fees ↗
SEC Investor.gov — Stop, Stop-Limit, and Trailing Stop Orders ↗
