A loss budget is not a margin requirement
In the position size calculator, account balance and account risk define a modeled dollar budget. Entry price and stop-loss price define a distance per unit. Dividing the budget by that distance gives quantity; multiplying quantity by entry gives notional exposure. The formula is the same whether the resulting exposure is smaller or larger than the entered account balance.
None of these operations asks how much collateral a provider requires. The account-balance field is not linked to an exchange account. Entering a number there does not make it eligible collateral, apply a collateral haircut or reserve funds against another position. The output also cannot confirm whether a contract or short position is available to a particular reader.
Initial margin and maintenance margin answer different questions. In its US-regulated derivatives documentation, Coinbase describes initial margin as what is needed to open a position and maintenance margin as the minimum needed to keep it open. It also explains that requirements can rise overnight or at weekends, especially with intraday rates. These are scoped product rules, not a universal schedule for all exchanges or jurisdictions. Coinbase documentation
Evidence: Coinbase documentation
Work through the supported calculation
All figures below are invented teaching inputs, not prices or suggested risk settings. Choose Long, account balance $10,000, account risk 1%, entry $100 and stop $95.
This means a $5 adverse move across 20 units produces a $100 gross price loss in the model. It does not promise a fill at $95 or cap the final loss. The calculator's own notice excludes fees, slippage, funding and liquidation. A stop input is a scenario assumption, not a simulated order.
Now change only the stop to $99.50. Distance falls to $0.50, so the same $100 budget produces 200 units and $20,000 notional. The interface warns that calculated exposure exceeds the account balance. That warning is a consequence of uncapped arithmetic; it is not an instruction to borrow and does not calculate margin approval or a liquidation threshold.
| Calculation | Hypothetical output |
|---|---|
| Risk budget: $10,000 × 1% | $100 |
| Distance: $100 − $95 | $5 per unit |
| Units: $100 ÷ $5 | 20 units |
| Entry notional: 20 × $100 | $2,000 |
Evidence: CryptoTrades position size and formula
The same price loss can have different percentage denominators
Return to the 20-unit scenario. A move from $100 to $95 creates a $100 gross loss. Relative to $2,000 entry notional, that is 5%. If we separately invent $200 of collateral, the same loss equals 50% of that amount. Against $1,000 of collateral it equals 10%.
Those collateral comparisons are simple ratios, not a derivatives-account simulation. We have specified no maintenance requirement, other positions or collateral valuation rules, so we cannot say whether either hypothetical account would survive to the chosen exit. There is no valid liquidation-price result hiding in those percentages.
The P&L tool makes the denominator explicit. Enter Long, entry $100, exit $95, position size 20 units and fee rate per side 0.1%. Modeled fees equal ($100 + $95) × 20 × 0.001 = $3.90. Gross P&L is −$100; modeled net P&L is −$103.90. Dividing by $2,000 gives −5.195%, displayed as −5.20%. The assumed fee is not a provider quote. Funding, borrowing, slippage and tax remain excluded.
For the general direction-and-fees walkthrough, read long and short P&L. This article focuses on why that arithmetic cannot establish a liquidation outcome.
Why an exchange estimate needs more information
Kraken's regulated-derivatives FAQ describes liquidation prices as estimates tied to mark prices. For its inverse futures, it refers to the portfolio value and maintenance requirements of all positions in the relevant margin wallet. Its linear-futures explanation distinguishes partial and full liquidation conditions. These details demonstrate why a quantity, entry and stop alone are insufficient; they should not be generalized to every Kraken product. Kraken FAQ
Coinbase also states that its displayed liquidation estimate excludes margin offsets and assumes other futures positions and unrealized P&L remain constant. A number displayed by a provider therefore still has assumptions. Its documentation includes regional differences in close-out treatment; this guide deliberately does not present one universal liquidation percentage. Coinbase documentation
Before interpreting a provider estimate, identify the exact product and account scope, the collateral included, the maintenance rule, the price reference and what the estimate assumes about other positions. If a field or definition is unavailable, mark it unknown. Do not replace missing account information with the stop price from a different calculator.
Evidence: Kraken FAQ · Coinbase documentation
Use the tools within their stated scope
Use the position-size tool to inspect how a loss-budget assumption and stop distance affect units and exposure. Use the P&L tool to compare a hypothetical entry and exit with a single percentage fee on both legs. Keep the inputs beside the result so another reader can reproduce it.
Neither tool calculates an exchange's liquidation process, submits an order or validates collateral. A result below account balance does not certify safety; a result above it does not certify access to leverage. A universal shortcut based only on entry price and a leverage multiplier would conceal the missing variables rather than resolve them.
Does selecting Short make this a margin calculator?
No. Direction changes the price-P&L sign and the permitted stop direction. It does not add borrowing, funding, collateral or liquidation inputs.
Can I enter the liquidation price as my stop?
The form accepts a hypothetical stop for the sizing formula. Substituting another number does not validate that number or turn the output into a liquidation calculation. Keep a planned stop scenario and a provider's conditional liquidation estimate conceptually separate.
What should I try next?
Reproduce the fictional position-size example, then change only the stop distance. Record the change in notional and the warning, without treating either as a recommendation. See the education library for related guides. Corrections can be sent through Contact with a public source, without personal account information.
Sources & method
- Coinbase documentation
Primary documentation checked November 2, 2026. Provider claims retain the scope and limitations described above. Checked 2026-11-02.
- Kraken FAQ
Primary documentation checked November 2, 2026. Provider claims retain the scope and limitations described above. Checked 2026-11-02.
- CryptoTrades position size and formula
Formula, interface fields and exposure warning checked against the implementation; numerical examples reproduced. No exchange-account tests. Checked 2026-11-02.
Continue learning
Found an error? Contact the editorial team with the page and supporting source. Never send private account information.