Curriculum·S207 Investing Frameworks (Unleveraged)·about 40 min
The drawdown math
By the end of this lesson you can
- →Compute the gain required to recover from any drawdown, and read the asymmetry it creates
- →Explain why the recovery requirement grows faster than the loss
- →Determine the maximum drawdown a position size can produce, before taking it
- →State the drawdown you can actually tolerate, in currency rather than in percentage
Sophomore · enrolled learners
This lesson opens with 1.6 million accounts, 10 October 2025.
- What happened
- More than $19B of leverage was liquidated in roughly a day, the largest single-day deleveraging event recorded, against open interest that stood near $217B. Of $9.89B in forced liquidations about 70 percent occurred inside 40 minutes, with a peak minute of $3.21B of which 93.5 percent was forced selling. More than 1.6 million trader accounts were affected. Bitcoin fell over 14 percent and ether more than 20 percent. For an unleveraged holder those moves were an unpleasant day. For a leveraged one they were terminal, because a liquidation converts a temporary drawdown into a permanent one by removing the position before any recovery can occur.
- The decision point
- The move itself was survivable and has occurred repeatedly in this asset's history. What was not survivable was the position size relative to it. A drawdown you hold through is a number on a screen; a drawdown that liquidates you is realized, and the difference between those two outcomes was decided before the day began, by sizing.
- Recorded loss
- $19,000,000,000
What you will be able to answer
- →What gain recovers a 50 percent drawdown?
- →Why is the asymmetry structural rather than psychological?
- →What converts a temporary drawdown into a permanent one?
- →How should you state your drawdown tolerance?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.coindesk.com/research/market-spotlight-the-19-billion-liquidation-that-shook-crypto
- https://www.coingecko.com/learn/october-10-crypto-crash-explained
- https://www.dalbar.com/PressReleases/doc/QAIB2024_PR.pdf
- https://www.coindesk.com/tech/2022/02/08/axie-infinity-reduces-slp-emissions-to-prevent-collapse
Confidence high·Volatility low·Reviewed 2026-08-06·Owner unassigned
Contested
S201-01 uses 10 October 2025 for order book depth and S203-01 for what a bar discards. This lesson uses it for the sizing consequence. Keep the split.
This course is unleveraged. Leverage appears here only as the mechanism that converts a drawdown into a liquidation, and R403 owns its treatment. Do not let a revision introduce leveraged strategy content.