---
title: "Leverage and liquidation guard · Trado Strategy Lab"
description: "At 20×, a move of about 4.5% against you loses the whole margin. The Lab models liquidation, refuses stops past it, and audits the leverage each coin allowed."
canonical: "https://algo.trado.trade/liquidation-and-leverage"
lastModified: "2026-10-06"
---

# Leverage kills quietly. The Lab shows you the number.

At 20× leverage, a move of about 4.5% against you loses the whole margin. Most tools never put that number next to your strategy. The Lab does, before you run and again in the report.

## The number that matters

On an isolated position, the move against you that liquidates it is roughly 100 divided by the leverage, minus the exchange's maintenance margin. With the Lab's default maintenance margin of 0.5% of notional, a position at 20× is liquidated by a 4.5% adverse move, and at 5× by a 19.5% one. Higher leverage does not just magnify gains; it shrinks the room a strategy has to be wrong.

The run form states this next to the leverage field, in the form “A move of 4.5% against you would liquidate this position at 20×”, so the figure is in front of you while you choose.

## What the backtest models

- **Liquidation**, for isolated and cross margin, inside the simulation: a liquidated position ends, and its loss counts.
- **Per-coin leverage caps.** Each coin trades at the lower of your leverage and its own cap, from the execution profile's table or the exchange's value. Backtests accept up to 125×; deployments up to 100×.
- **The liquidation guard.** If a stop-loss sits at or beyond the liquidation price at your leverage, the run is refused with an explanation, because that stop could never trigger. You can acknowledge the warning and run anyway.
- **The leverage audit** in every report: which caps applied, to which coins, and where they came from.

## Research runs are labelled as research

You can run a what-if with leverage caps ignored. The report says so, and a strategy tested that way cannot be deployed, so a research shortcut never becomes a live position by accident.

## What this does not do

The Lab models liquidation from an execution profile's maintenance margin and rules. A real exchange account can differ in the details, such as tiered margin or auto-deleveraging in extreme markets. Trading leveraged derivatives can lose more than you expect, including the whole margin. This is software, not advice, and a good backtest is not a promise.

Read the long version in [leverage and liquidation, explained](https://algo.trado.trade/learn/leverage-and-liquidation-explained.md).

## Leverage questions

### What leverage should I use?

The Lab does not tell you. It shows what each setting means: the adverse move that liquidates you, how often your backtest was liquidated, and what each coin allowed. Lower leverage leaves more room for a strategy to be wrong.

### What does the liquidation guard refuse?

A run whose stop-loss lies at or beyond the isolated liquidation price at its leverage. The position would be liquidated before the stop could fire. The refusal explains why; you may acknowledge it and run anyway.

### Does it model cross margin?

Yes, backtests model both isolated and cross liquidation.

## Next steps

- [Join the waitlist](https://algo.trado.trade/waitlist)
- [See pricing](https://algo.trado.trade/pricing)

## Related

- [Leverage and liquidation explained](https://algo.trado.trade/learn/leverage-and-liquidation-explained.md): At 20×, a move of about 4.5% against you wipes out the margin. How liquidation price works on crypto perpetuals, isolated versus cross, and what to check.
- [Crypto backtesting after every cost](https://algo.trado.trade/backtesting.md): Backtest crypto perpetuals on years of 1-minute data for 900 coins, after fees, funding, slippage and liquidation, with a verdict that admits weak evidence.
- [Paper trading for crypto strategies](https://algo.trado.trade/paper-trading.md): Take a backtested strategy to paper trading in one click. The same rules run on live Binance prices; going live is a separate step you approve.
- [Algo trading for beginners](https://algo.trado.trade/for-beginners.md): Start algo trading without code or a data pipeline: describe an idea, backtest it honestly, ask the Copilot why, and paper-trade before you risk a rupee.