Liquidation is the word traders use for the worst moment in leveraged trading: the platform closes your position for you, automatically, and the money you put behind it is gone. It is not a penalty and not a fee. It is the margin rules doing exactly what they said they would do.
If you trade perpetual futures, which is what every market on Based is, liquidation is the single most important concept to understand before your first trade. This guide explains what triggers it, walks through an example in words, and covers the habits that keep it far away.
What actually triggers it
When you open a perp position you post margin, USDC from your wallet that backs the position. As the price moves, your profit or loss accrues against that margin. Move in your favor and the margin grows. Move against you and the margin shrinks.
If the price moves against you far enough, the margin left is no longer enough to safely back the position. At that point the position is closed automatically at the market price. That is liquidation. Nobody makes a phone call and nobody reviews the decision. The rule is written into the market and it applies to every participant the same way.
A worked example in words
Say you put up $100 of margin at 10x leverage. That controls a $1,000 position. Now a 1 percent move in the price is a $10 change in your position's value, which is 10 percent of your margin.
If the price falls 5 percent against you, the position is down $50 and half your margin is gone. If it falls roughly 10 percent, the margin is effectively used up. Liquidation arrives slightly before that point, because the platform keeps a required buffer and closes the position once the remaining margin hits it. At 10x leverage, a routine bad afternoon can be the whole margin. At 2x, the same math needs a move of about 50 percent against you, which is a different world entirely.
Maintenance margin, in plain terms
The buffer mentioned above has a name: maintenance margin. It is the minimum amount of margin the position must keep behind it at all times, a small fraction of the position's value. While your margin sits comfortably above that line, nothing happens. The moment losses bring it down to the line, liquidation triggers.
The reason it exists is practical. The platform closes positions while there is still a little margin left, so the loss can be covered and no trader ends up owing money. Maintenance margin is the safety rail that keeps a leveraged market solvent, and it is also the reason liquidation comes a bit earlier than the full wipeout point in the example above.
Why this is different from holding a stock
A stock you own outright can fall 40 percent and recover a year later while you wait. You never enjoy the wait, but the shares are still yours at the end of it. A leveraged perp position does not get that luxury. A much smaller move can liquidate it, and there is no waiting for the recovery afterwards, because the position no longer exists. The perps guide covers the instrument in full, including funding fees, which apply while any position is open.
How to avoid liquidation
The defenses are boring and they work. First, use low leverage or none. An unleveraged long can only be liquidated if the price falls to nearly zero, and lower leverage pushes the liquidation price further away on every trade.
Second, size positions against your wallet, not your conviction. A position that would sting to lose is large enough. Third, know your liquidation price before you open. The Based app shows it on the trade screen before you confirm, and it stays visible on your position afterwards. If that number sits anywhere near the current price, the position is too big or too leveraged for the margin behind it.
None of this removes risk. Trading perps means a position can still lose, and funding fees still apply while it is open. The goal is simply to make sure that being wrong costs you a manageable amount rather than the whole margin.