How to Calculate Your Liquidation Price on PredMart
Your liquidation price is the mark price at which your loan-to-value ratio hits 85%. On PredMart, this is calculated against the depth-weighted mark - the average price to sell approximately $1,000 worth of shares into the order book - not the last traded price. At maximum 5x leverage, you have roughly a 15-16% buffer before liquidation; at lower leverage, that buffer widens significantly.
Knowing your liquidation price before you open a position is essential for risk management. This guide walks through the exact calculation with worked examples at different leverage levels.
How Does PredMart Calculate Liquidation Price?
PredMart uses a flat 80% loan-to-value (LTV) ratio for all positions, regardless of share price. Liquidation triggers when your LTV crosses the 85% threshold - that extra 5% above the 80% max serves as a protective buffer.
The formula to estimate your liquidation price is:
Liquidation Price = Entry Price x (1 - Buffer Percentage)
Where your buffer percentage depends on your leverage:
| Leverage | Effective Buffer | Approximate Move to Liquidation |
|---|---|---|
| 5x (max) | ~15-16% | Entry price drops ~15-16% |
| 4x | ~20% | Entry price drops ~20% |
| 3x | ~27% | Entry price drops ~27% |
| 2x | ~40% | Entry price drops ~40% |
The relationship is straightforward: lower leverage means more room before liquidation. At 5x, every 1% move in the underlying is magnified to a 5% change in your equity, so you hit the 85% LTV threshold faster.
Worked Example: 5x Leverage Position
Let's say you want to go long on an outcome trading at $0.60 with maximum 5x leverage.
Position Setup: - You deposit $100 of your own capital - At 5x leverage, you borrow $400 from the lending pool - Total position size: $500 (buying 833 shares at $0.60)
Finding Your Liquidation Price:
Your loan is $400. Liquidation occurs when that loan equals 85% of your position value:
$400 = 0.85 x (Shares x Liquidation Price)
$400 = 0.85 x (833 x Liquidation Price)
Liquidation Price = $400 / (0.85 x 833) = $0.565
That's a drop of about 5.8 cents or roughly 9.7% from your $0.60 entry. However, because the mark price (not last trade) determines liquidation, and the mark reflects actual order book depth, thin markets may trigger liquidation at slightly higher displayed prices.
The practical rule: at 5x on prediction markets, expect roughly a 15-16% adverse move to trigger liquidation, accounting for the entry fee that reduces your effective equity.
Worked Example: 2x Leverage Position
Now consider the same $0.60 outcome with conservative 2x leverage.
Position Setup: - You deposit $100 of your own capital - At 2x leverage, you borrow $100 from the lending pool - Total position size: $200 (buying 333 shares at $0.60)
Finding Your Liquidation Price:
$100 = 0.85 x (333 x Liquidation Price)
Liquidation Price = $100 / (0.85 x 333) = $0.353
That's a drop of about $0.247 or roughly 41% from your $0.60 entry - dramatically more breathing room than the 5x position.
This illustrates why experienced traders often choose moderate leverage on volatile prediction markets. A 2x position can survive significant adverse moves that would liquidate a 5x position multiple times over.
Why Is Liquidation Based on Mark Price, Not Last Trade?
PredMart uses the depth-weighted mark price - the average price to sell approximately $1,000 worth of shares into the current order book - rather than the last traded price. This design choice exists for three critical reasons:
-
Manipulation resistance: A single small trade cannot spike or crash the last price to trigger liquidations. The mark reflects actual available liquidity.
-
Real exit value: The mark approximates what you would actually receive if you needed to close your position, making liquidation calculations more accurate.
-
Order book reality: On prediction markets with thinner liquidity, the last trade price may not reflect where you can actually execute. The depth-walk accounts for slippage.
For traders, this means monitoring the order book matters as much as watching price charts. A market with thin bids will have a lower mark price than its last trade might suggest. Learn more about this mechanism in our liquidation documentation.
What Happens When You Get Liquidated?
PredMart uses Binance-Futures style liquidation. When your position's LTV crosses 85% against the mark:
- Your entire position is closed immediately
- Your collateral is used to repay the loan principal plus accrued interest
- A 5% liquidator fee is deducted
- No surplus is returned to you - your collateral is fully consumed
This differs from some DeFi protocols that return excess collateral after liquidation. On PredMart, a liquidation event means losing your entire deposited margin for that position.
Key implications: - Never deposit more than you can afford to lose in a single position - Monitor positions actively, especially during high-volatility events - Consider closing manually at a small loss rather than risking full liquidation
For a deeper explanation of how liquidation mechanics work, see our guide on how liquidation works on Polymarket.
How Can You Estimate Liquidation Price Before Opening?
Before entering any leveraged position on PredMart, you can estimate your liquidation price with this quick method:
Step 1: Determine your leverage multiple (e.g., 3x)
Step 2: Calculate your buffer using this approximation: - Buffer % = (1 / Leverage) x 80%
Step 3: Subtract that percentage from your entry price
Example at 3x leverage, $0.50 entry: - Buffer = (1/3) x 80% = ~27% - Liquidation estimate = $0.50 x (1 - 0.27) = $0.365
This gives you a rough estimate. The actual liquidation price will be slightly higher due to: - The entry fee (up to ~7% on volatile contracts) reducing your effective equity - Accrued interest on the borrowed portion - Order book depth affecting the mark price
PredMart's interface shows your exact liquidation price when you configure a position, accounting for all these factors. Always verify against the displayed value before confirming your trade.
FAQ
What leverage should I use to avoid liquidation? Lower leverage provides more buffer against adverse price moves. At 2x leverage, you can withstand roughly a 40% drop before liquidation. At 5x, that buffer shrinks to about 15-16%. For volatile prediction markets or sports events, conservative leverage between 2-3x is often prudent.
Can I add margin to prevent liquidation? Currently, PredMart positions have fixed margin at entry. If your position approaches liquidation, you can close it manually at a partial loss rather than risk full liquidation. Closing before the 85% threshold preserves some capital.
Why did I get liquidated at a different price than expected? Liquidation is based on the depth-weighted mark price, not the last traded price. If order book liquidity is thin on the bid side, the mark will be lower than recent trades suggest. This is especially common in sports markets with concentrated liquidity.
Does the entry fee affect my liquidation price? Yes. The entry fee (up to ~7% on volatile contracts) is deducted from your deposit, reducing your effective equity. This means your actual liquidation price is slightly higher than a pure leverage calculation would suggest.
How do I monitor my liquidation risk? Watch your position's LTV ratio in the PredMart interface, and pay attention to order book depth on the outcome you hold. Thin bids mean the mark price can drop faster than last trade prices indicate.
Trade with up to 5x leverage on PredMart: https://predmart.com