Can a gain of twenty percent cancel a loss of twenty percent? Start with one hundred dollars. A twenty percent gain takes it to one hundred and twenty. Now lose twenty percent of that larger amount. You finish with ninety six dollars. The percentages look symmetric, but the dollars they act on are different.

Compounding multiplies wealth by one plus each return. Our two multipliers are one point two and zero point eight. Their product is zero point nine six. Reverse the order and the result is unchanged. After a twenty percent loss, recovering takes a twenty five percent gain. A smaller base needs a larger percentage to rebuild.

Leverage steepens this relationship. Suppose one thousand dollars of equity supports five thousand dollars of linear exposure. That is five times leverage at entry. A two percent move changes the position by one hundred dollars, or ten percent of starting equity. Reverse the price move and the same arithmetic gives a loss. Costs are excluded.

Follow equity as the underlying falls. In this simplified fixed position, a sixteen percent fall leaves two hundred dollars. Our illustrative maintenance threshold is reached before the twenty percent fall that would consume starting equity. Actual thresholds, fees and liquidation rules depend on the venue. Gaps can make losses worse. Leverage changes the size of consequences, not the quality of a forecast.