Liquidation Guard

Pre-Deploy Gate — run every step, stop on first FAIL

Step 0 — Order Size Validation

Given: budget, range (start_price → end_price), spacing, min_order_size, exchange_minimum

1. Compute levels: levels = (end_price - start_price) / (spacing × mid_price)
2. Compute per-level size: per_level = total_amount_quote / levels
3. Check: per_level ≥ max(min_order_size, exchange_minimum)
4. If FAIL:
   • Reduce levels (widen spacing) until per_level passes
   • If no valid configuration exists → FAIL: budget too small for this range

Step 1 — Worst-Case Position Size

Assume every grid level fills (worst case for LONG = price at start_price, worst case for SHORT = price at end_price).

• For each level, compute: level_base = per_level_quote / level_price
• total_base = Σ level_base across all levels
• avg_entry = total_amount_quote / total_base

Step 2 — Worst-Case Liquidation Price

Using isolated-margin formula:

• LONG: liq_price = avg_entry × (1 - 1/leverage + maintenance_margin_rate)
• SHORT: liq_price = avg_entry × (1 + 1/leverage - maintenance_margin_rate)

Where maintenance_margin_rate depends on the exchange's position tier for the notional total_base × limit_price. Typical values:

• Tier 1 (small positions): 0.4% (0.004)
• Tier 2 (medium): 0.5% (0.005)
• Tier 3 (large): 1-2% (0.01-0.02)

When in doubt, use the higher tier — it's conservative.

Step 3 — The Check

• LONG grid: liq_price must be below limit_price
  • PASS if liq_price < limit_price
  • FAIL if liq_price ≥ limit_price
• SHORT grid: liq_price must be above limit_price
  • PASS if liq_price > limit_price
  • FAIL if liq_price ≤ limit_price

Step 4 — If FAIL, try remediation (in order)

1. Reduce leverage by 1 step → recompute from Step 2
2. If leverage is already at minimum useful level → narrow the range (fewer levels, wider spacing) → recompute from Step 1
3. If still FAIL → HOLD and report

Reporting

On PASS, include in deploy report:

• liq_price: <value>
• liq_guard: PASS
• margin_buffer: <distance between limit_price and liq_price as %>

On FAIL, report:

• liq_price: <value>
• limit_price: <value>
• leverage: <value>
• liq_guard: FAIL — <reason>
• remediation_attempted: <what was tried>
• action: HOLD

Why this matters

limit_price only protects you if the exchange hasn't already liquidated you. At full fill with high leverage, liquidation can be closer than you think. This check guarantees your exit fires first — every time, before every deploy, no exceptions.