Trading Academy · Module 1 — Why slow wins · Lesson 2/4

Leverage, liquidation, and an ordinary Tuesday

Lesson 2 of 22 in the curriculum · ~6 min read

At 20× leverage, the market does not need a crash to take everything you put up — a 5% move against you, the kind major coins make on a slow news day, is 100% of your margin. The distance to liquidation is one division: roughly 100 ÷ leverage.

5% an ordinary day's move for a major crypto — and, at 20× leverage, enough to wipe the position's entire margin. No news required.

Two words first. Leverage means trading with borrowed exposure: at 10×, you put up $1,000 of your own money — the margin — and control a $10,000 position (all figures here hypothetical). Gains and losses are computed on that hypothetical $10,000, but your cushion is only the $1,000. Liquidation is the exchange force-closing that position when the loss has eaten the cushion. It is not a warning — the margin is simply gone.

How far does price have to move against you before that happens? Approximately 100 ÷ leverage, in percent:

Leverage	Move that wipes the margin	In crypto terms, roughly…
3×	≈ 33%	a genuine bear leg, weeks or months in the making
5×	≈ 20%	a sharp correction — a bad week or two
10×	≈ 10%	a strongly red day; several arrive every quarter
20×	≈ 5%	an ordinary Tuesday — no news required
50×	≈ 2%	an hour of routine chop

Simplified: the true distance is slightly shorter because of maintenance margin — the full lesson computes it. The right-hand column is illustrative of commonly observed magnitudes, not a statistic.

Bar chart of the adverse price move that wipes a position's margin at 3x, 5x, 10x, 20x and 50x leverage, with a shaded band marking an ordinary day's range for a major cryptocurrency — The bars are the cushion; the shaded band is what a normal day can do. At 20× and beyond, the bar sits inside the band.

Hold the last two rows against the previous lesson's recovery curve: liquidation is a 100% loss of that margin, and 100% losses live on the vertical wall. This is why the signals published on this site use 3× and 5× on isolated margin, and nothing higher — at those levels, only a move that takes weeks can reach the margin, and every published signal carries a stop-loss far inside that distance.

The full lesson computes the true liquidation distance including maintenance margin, works through why "I'll close it before it gets there" fails in practice (gaps, cascades, and the fact that you sleep), compares what liquidation does under isolated versus cross margin, explains what leverage is actually for, and ends with an exercise: computing the liquidation distance of a position you were tempted by.

Full lesson

The rest of this lesson — the worked examples, the exercises, and how our own system applies it — is included with any paid NoGuru subscription. Members receive a personal access link by Telegram DM; open it once and every lesson unlocks on this device.

See channels & pricing Back to the curriculum

← The arithmetic of losses Expectancy: why win rate isn't the score →