Leverage and margin
How does a fast hour eat the cushion that stands between a leveraged position and forced closure?
In plain words
Leverage lets a trader hold a position larger than the money they deposit, and margin is that deposit, serving as a cushion against losses. As the market moves against the position, the cushion shrinks; when it reaches the exchange's maintenance margin, the position is closed automatically.
Why it matters
Leverage scales losses as quickly as gains, so the cushion, not the view, decides survival. A position that is directionally right by the end of a week can still be closed out mid-week if a single fast hour exhausts the margin behind it.
In a real week: BTC, week of 25 January 2021
In the week of 25 January 2021, BTC opened at 32259.45, fell to 29241.72 on Wednesday 27 January at 14:00 UTC, and the largest single hourly move of the week, 12.32%, was recorded at Friday 29 January at 08:00 UTC, with a 31.77% range before closing the week at 33092.98. A leveraged long sized on Monday's open could have exhausted its margin before the week's larger swings arrived.
A common mistake
Judging a leveraged position by its weekly result. A week that closes positive can still contain an hour deep enough to close the position out before the recovery.