How is this estimate worked out?
In isolated-margin mode, liquidation happens roughly at the price where the position's loss has eaten through the initial margin and only the maintenance margin is left. The simplified formulas this tool uses: long liquidation price ≈ entry price × (1 − 1/leverage + maintenance margin rate); short liquidation price ≈ entry price × (1 + 1/leverage − maintenance margin rate).
It is worth being clear that this is a simplified estimate. Binance's real liquidation price is also affected by maintenance-margin tiers, fees, funding rates, and, in cross-margin mode, the profit and loss on your other positions, and it triggers on the mark price rather than the last traded price. Once a position is open, treat the liquidation price shown on Binance as the one that counts; this tool is here to help you feel the safety distance under different leverage before you enter.
If the liquidation mechanism itself is still unclear, start with Binance Futures: Leverage, Liquidation, and Risk; to keep a lid on the loss per trade, pair this with the Position Size Calculator. Futures leverage magnifies losses just as much as gains, and it does not suit most beginners.