GMX liquidation and leverage

Leverage compares position exposure with effective collateral. A $10 000 position backed by roughly $2 000 of effective collateral begins near 5x leverage. Fees and unrealized losses reduce effective collateral, so actual leverage rises as the trade moves against you.

Higher leverage means a smaller adverse move can consume the available buffer. Maximum leverage varies by market and is a technical limit, not a prudent target. Small positions can also have unexpectedly tight liquidation prices because fixed minimum collateral and execution costs represent a larger percentage of their margin.

GMX evaluates remaining collateral after unrealized loss, accrued position costs and capped negative price impact. Liquidation occurs when that value falls below the market's minimum collateral threshold, which official documentation describes as typically 0.25% to 1% of position size depending on configuration.

For a long position GMX uses the minimum index price when calculating PnL; for a short it uses the maximum index price. Collateral is valued with the minimum collateral-token price. These conservative sides of the oracle spread matter near liquidation.

An applicable borrow fee and any funding cost accrue while a position is open. A trader can therefore move closer to liquidation even if the index mark appears unchanged. Volatile collateral creates another moving input because the value supporting the position can fall independently of the index.

Adding collateral first covers pending fees before improving the buffer. A deposit that is smaller than accrued costs, or that still leaves the position below the requirement, can fail simulation. Review the new liquidation estimate after the collateral transaction executes.

GMX charges a liquidation fee as a percentage of notional position size, with the rate depending on market type. Current official documentation lists 0.20% for standard non-synthetic markets, 0.30% for single-token and synthetic markets, and 0.45% for designated high-volatility markets.

The liquidation fee is applied when the position closes, rather than being part of the protocol's initial liquidatability check. Any collateral remaining after losses and applicable costs is returned to the wallet. Liquidation is therefore not always exactly a zero balance, but traders should plan as if most assigned collateral is at risk.

A StopLossDecrease order may be attempted before liquidation when eligible, but it is not guaranteed. A single oracle update can cross both the stop trigger and liquidation threshold, or the stop can fail because valid signed prices, liquidity or on-chain conditions are unavailable.

Take-profit orders are not given the same pre-liquidation treatment. The practical defense is lower leverage, sufficient collateral and a stop trigger with meaningful distance from liquidation. Monitoring funding, borrowing and collateral value matters for positions held over time.

Before opening, inspect the live liquidation price, position fee, borrowing rate, funding rate, collateral token and negative price-impact estimate. Re-check those values after increasing size or withdrawing collateral.

Avoid depending on a third-party shortcut formula for an exact on-chain result. GMX's interface and SDK calculate from current market configuration and oracle values. If losing the assigned collateral would affect essential finances, the position is too large regardless of its displayed leverage.