diff --git a/freqtrade/leverage/liquidation_price.py b/freqtrade/leverage/liquidation_price.py
index b1647efd2..17526cb58 100644
--- a/freqtrade/leverage/liquidation_price.py
+++ b/freqtrade/leverage/liquidation_price.py
@@ -20,7 +20,6 @@ def update_liquidation_prices(
     """
     Update trade liquidation price in isolated margin mode.
     Updates liquidation price for all trades in cross margin mode.
-    TODO: this is missing a dedicated test!
     """
     if exchange.margin_mode == MarginMode.CROSS:
         total_wallet_stake = 0.0
@@ -42,7 +41,7 @@ def update_liquidation_prices(
                     wallet_balance=total_wallet_stake,
                 )
             )
-    elif trade:
+    else:
         trade.set_liquidation_price(
             exchange.get_liquidation_price(
                 pair=trade.pair,
diff --git a/tests/leverage/test_update_liquidation_price.py b/tests/leverage/test_update_liquidation_price.py
new file mode 100644
index 000000000..1b25babd0
--- /dev/null
+++ b/tests/leverage/test_update_liquidation_price.py
@@ -0,0 +1,57 @@
+from unittest.mock import MagicMock
+
+import pytest
+
+from freqtrade.enums.marginmode import MarginMode
+from freqtrade.leverage.liquidation_price import update_liquidation_prices
+
+
+@pytest.mark.parametrize("dry_run", [False, True])
+@pytest.mark.parametrize("margin_mode", [MarginMode.CROSS, MarginMode.ISOLATED])
+def test_update_liquidation_prices(mocker, margin_mode, dry_run):
+    # Heavily mocked test - Only testing the logic of the function
+    # update liquidation price for trade in isolated mode
+    # update liquidation price for all trades in cross mode
+    exchange = MagicMock()
+    exchange.margin_mode = margin_mode
+    wallets = MagicMock()
+    trade_mock = MagicMock()
+
+    mocker.patch("freqtrade.persistence.Trade.get_open_trades", return_value=[trade_mock])
+
+    update_liquidation_prices(
+        trade=trade_mock,
+        exchange=exchange,
+        wallets=wallets,
+        stake_currency="USDT",
+        dry_run=dry_run,
+    )
+
+    assert trade_mock.set_liquidation_price.call_count == 1
+
+    assert wallets.get_total.call_count == (
+        0 if margin_mode == MarginMode.ISOLATED or not dry_run else 1
+    )
+
+    # Test with multiple trades
+    trade_mock.reset_mock()
+    trade_mock_2 = MagicMock()
+
+    mocker.patch(
+        "freqtrade.persistence.Trade.get_open_trades", return_value=[trade_mock, trade_mock_2]
+    )
+
+    update_liquidation_prices(
+        trade=trade_mock,
+        exchange=exchange,
+        wallets=wallets,
+        stake_currency="USDT",
+        dry_run=dry_run,
+    )
+    # Trade2 is only updated in cross mode
+    assert trade_mock_2.set_liquidation_price.call_count == (
+        1 if margin_mode == MarginMode.CROSS else 0
+    )
+    assert trade_mock.set_liquidation_price.call_count == 1
+
+    assert wallets.call_count == 0 if not dry_run else 1