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The Lab

Ideas traders use, put to the record · updated 30 Oct 2026 21:56 UTC

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#7 Liquidation cascades A hint

The idea

When a wave of longs is liquidated, the selling is forced, not a view of the price: once it is over, the price tends to bounce back.

Why test it

Liquidation feeds are watched for "cascades", and buying the flush is a common rule. The other story says forced selling marks a market that is breaking, and the fall goes on. The record can tell which.

What we tested

Every five minutes, for each coin: the dollars of longs liquidated over the last hour, minus the dollars of shorts, on the three exchanges. Against: the price change over the next hour. Data: our own record of liquidations on OKX, Bybit and Binance, and of the price every five minutes; 32 coins, 171,469 snapshots.

Record tested: 11 Oct 2026 – 30 Oct 2026 · first run: 13 Oct 2026 · numbers as of: 30 Oct 2026 21:56 UTC, updated every minute.

What we found

A hint. Something, as the idea says, but not clearly more than chance. After the snapshots when the most longs were forced out, the next hour went 0.8 bps better than after the snapshots when the most shorts were forced out: under $1 on every $10,000.

-2.1-1.5+3.2+1.8-1.2← shorts forced out mostlongs forced out most →

Every snapshot of every coin sorted into five equal groups by the signal, low to high, and the average move over the next hour after each group, in basis points (0.01%) above or below the average move. If the idea were right, the bars would climb from left to right.

How sure

What could still be wrong

The record is days, not years, and one wild day can fill it. Binance reports at most one liquidation a second for each coin, so its totals are a floor. Liquidations come right after the price moves, so the bounce test matters most here. Most hours have no liquidations at all, so the middle groups hold the quiet hours and are not equal in size. The settings were fixed on 13 Oct 2026, before any of its numbers were seen.

All the numbers

By day · mean rank correlation

+0.063
11 Oct
+0.083
12 Oct
+0.002
13 Oct
+0.149
14 Oct
+0.074
15 Oct
+0.060
16 Oct
+0.124
17 Oct
-0.057
18 Oct
+0.132
19 Oct
+0.231
20 Oct
+0.135
21 Oct
+0.072
22 Oct
+0.029
23 Oct
-0.027
24 Oct
+0.015
25 Oct
+0.268
26 Oct
+0.152
27 Oct
-0.059
28 Oct
-0.182
29 Oct
+0.081
30 Oct

Other settings · mean rank correlation

next 15 minnext 60 minnext 4 h
liquidations, last 15 min+0.033
t +10.3
+0.019
t +4.0
+0.011
t +2.4
liquidations, last 60 min+0.013
t +3.2
+0.016
t +2.5
+0.014
t +1.8
liquidations, last 4 h+0.033
t +10.7
+0.048
t +7.4
+0.084
t +7.7

The test above is the last 60 min against the next 60 min; these are the other spans. With several tries one will look good by luck, so all are shown.

By coin · rank correlation

coinrank corr.
MAGIC+0.124
STRK+0.085
SUI+0.062
ADA+0.059
RSR+0.052
DOGE+0.045
ZRO+0.042
DOT+0.037
S+0.036
W+0.031
ARB+0.030
TAO+0.029
BTC+0.027
AVAX+0.019
FIL+0.018
TIA+0.017
LTC+0.014
SOL+0.012
GRASS+0.011
ETH+0.006
XRP+0.005
AAVE-0.006
APT-0.007
NEAR-0.008
UNI-0.010
ZEC-0.011
HYPE-0.012
LINK-0.014
INJ-0.029
ONDO-0.038
WLD-0.040
ENA-0.062

Update, 27 October 2026: where the idea comes from

Added after this page was published. The study above is left as it was.

Credits

← Crowded fundingThe hour's habit →

How to read a study: the maths, step by step

1. Basis points (bps). A hundredth of a percent: 100 bps is 1%. 10 bps on $10,000 is $10. Buying and selling once (a round trip) at typical fees costs about 10 bps, so an effect smaller than that loses money.

2. The five groups (fifths). Take every hour of every coin and sort them by the signal, lowest to highest. Cut the pile into five equal groups. For each group, average the price move that followed. Each bar shows its group's move above or below the average of all hours, so a market that simply rose all month doesn't count. If the idea is right, the bars climb (or fall) steadily from one end to the other.

3. Rank correlation (Spearman's). One number for "when the signal is higher, is the move after higher too?" Put the hours in order by the signal (1st, 2nd, 3rd…), and again by the move that followed, then compare the two orders. Five hours in exactly the same order in both give +1; exactly reversed, −1; no pattern, about 0. Markets are noisy, so real effects are tiny: 0.03 held for years is notable. We work it out for each coin, then take the average over the coins.

4. t: more than luck? Even with no real link, an average comes out a little above or below zero by chance. How much it usually wobbles (the standard error) can be worked out from how much the coins disagree with each other. t is the average divided by that wobble. For example, an average of 0.02 with a usual wobble of 0.005 gives t = 4: four times what luck usually makes. Luck alone passes ±2 about 1 time in 20, and ±3 only a few times in 1,000. We ask for ±3, because coins move together and neighbouring hours overlap, which makes luck look surer than it is.

5. "The price bouncing back" taken out. Some signals mostly echo the price's last move: a fall, then a bounce. We remove what that last move already explains and check that what is left still lines up with the move after, with t still beyond ±3.

6. Many settings tried. Try twenty settings and one will look good by luck, so every setting tried is shown under "All the numbers", not only the best.

7. Old data and new data. The settings tested (distances, horizons, thresholds) were set on 12 Oct 2026, after a first look at the numbers (a study added later gives its own dates). The record from 13 Oct 2026 on was unseen when they were chosen, so it is the fair test: each study judges it apart, as "holds on new data", once there is enough of it.

The verdicts. Holds up: every test passed. Real, but small: every test passed but one: the effect is too small to pay for a trade's costs. Partly: more than chance, but some tests failed. A hint: t beyond ±2 but not ±3: perhaps something, perhaps luck. No sign: nothing the record can tell from chance. Too early: under 2 weeks of record. No reliable edge: a write-up's word: what looked good did not hold up against chance or on unseen data. No edge after fees: a write-up's word: there is something, but trading costs eat it. Not shown: a write-up's word: the record could not show that the idea helps. Passed, on a weak bar: a write-up's word: it cleared the bar set in advance, but the bar proved easy; the stricter reading, added after, is shown apart. No reliable gain: a write-up's word: the versions that looked better did not clear the bar set in advance: all three coins, at both a day and a week. Failed on fresh data: a write-up's word: a lead from one study, tested again on prices kept apart, did not hold. Not proven, a lead: a write-up's word: it failed the test set in advance, but pointed the same way throughout; worth a fresh test. Holds, with the coins paid for: a write-up's word: it held up through every test, but only as set out: the coins bought outright, nothing borrowed. Not confirmed; the lead holds: a write-up's word: on fresh data it fell just short of the bar set in advance, but still pointed the same way.

13 Oct 2026 · Liquidation cascades added, from our own record of liquidations. Its settings were fixed before any of its numbers were seen; it waits for two weeks of record.

Historical data: Binance Vision (data.binance.vision), used under CC BY-NC-SA 4.0 (creativecommons.org/licenses/by-nc-sa/4.0); what is drawn from it here is shared under the same licence.

Educational research from public market data; any trading discussed is paper, never real. Nothing here is advice. The full notice.