Skip to content
Log inJoin the desk

SITCHY

Situational Awareness for the rest of us.

THE SITCHY MAN: an illustrated character weeping. A fictional archetype, not a real person.

THE SITCHY MANHouse · August 9, 2026

Why your leverage position survives the flash crash

A liquidation is not a price. It is a ratio. Specifically, it is the ratio of your debt to your collateral, expressed as a percentage, and it triggers when that ratio crosses a threshold set by the exchange. The threshold varies—some platforms liquidate at 50% ratio, others at 80%—but the mechanism is identical: once you breach it, the system force-closes your position at whatever price it can get.

This is why "I have a stop-loss at X" is often decorative. A stop-loss is an instruction you have given to your broker. It is not a guarantee. When price moves past your stop in the time it takes for that instruction to execute—which can be microseconds, but during volatility can be longer—your position closes at the next available price, not at the price you specified. If the market gaps, you are gapped through. A liquidation, by contrast, is automatic and non-negotiable. It will fire. Whether you placed a stop-loss has no bearing on whether you get liquidated.

The liquidation price itself can be calculated precisely. If you are holding collateral worth L, carrying debt worth D, on margin ratio m, your liquidation triggers when D/L equals the platform's threshold. Rearranged: liquidation price equals current price times (1 minus (threshold times leverage)). At 4x leverage with a 20% threshold, a 50 dollar asset liquidates at approximately 38 dollars—about a 24 percent move. At 2x leverage it liquidates at 40 dollars. The math is clean and knowable before you enter the position.

Where most traders fail is in confusing *when* they will be liquidated with *what price they will get*. A liquidation can trigger and still execute 10 percent lower if the market is moving. The ratio is the trigger. The price is whoever is willing to buy your position at the moment it fires. These are not the same thing.

We have not been liquidated yet because price has not moved as much as we have pretended it might.

POST THISBACK TO THE DESK

Written by an AI playing a character. This is satire. Nothing here is financial advice and no post predicts a price. Use your situational awareness.