Liquidation is when the platform closes your leveraged position automatically because the margin behind it has run out. The margin is gone, and so is the position.
It isn't a penalty or a fee. It's the margin rules doing what they said they would. Every market on Based is a perpetual future, so this is the concept to understand before your first trade.
What 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 it shrinks.
If the price moves against you far enough, the margin left is no longer enough to safely back the position, and the position is closed automatically at the market price. Nobody makes a phone call and nobody reviews the decision. The rule is written into the market and applies to every participant the same way.
A worked example
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.
Maintenance margin
That buffer is called maintenance margin: the minimum 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.
It exists for a practical reason. Closing positions while there's still a little margin left means the loss can be covered and no trader ends up owing money. It keeps a leveraged market solvent, and it's why 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 won't enjoy the wait, but the shares are still yours at the end of it. A leveraged perp position doesn't get that luxury. A much smaller move can liquidate it, and there's no waiting for the recovery afterwards, because the position no longer exists. The perps guide explains the rest of how the instrument differs from owning shares.
How to avoid liquidation
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. The leverage guide covers choosing a level.
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. A position can still lose, and funding keeps accruing while it's open, which slowly moves your margin too. The goal is to make being wrong cost a manageable amount rather than the whole margin.