Leverage
Borrowing money to make bigger trades than you could afford. Multiplies gains but also multiplies losses - you can lose more than you put in.
Example
Using 5x leverage means $100 controls $500 worth of crypto. A 10% price move becomes a 50% gain or loss for you.
Related Terms
Advanced Concepts
⚙️How It Works
- 1
Deposit Margin
Put up your initial capital as collateral
- 2
Borrow More
Platform lends you additional funds (e.g., 5x your deposit)
- 3
Open Position
Trade with the larger, combined amount
- 4
Amplified Results
Gains and losses are multiplied by your leverage ratio
📊Key Numbers
2x gains/losses
2x Leverage
conservative
20% move = liquidation
5x Leverage
moderate risk
10% move = liquidation
10x Leverage
high risk
1% move = wipeout
100x+ Leverage
gambling
🔍Common Misconceptions
✗Higher leverage = higher profits
✓Higher leverage also means higher chance of total loss. Most leveraged traders lose money.
✗Stop losses protect you from liquidation
✓During flash crashes, price can gap past your stop loss straight to liquidation.
✗Pros use high leverage
✓Professional traders typically use low leverage (1-3x) and strict risk management.
⚠️Risks & Warnings
- •Liquidation wipes out your entire position if price moves against you
- •Funding rates on perpetuals can eat profits over time
- •High volatility + high leverage = very likely liquidation
- •Emotional trading is amplified when losses stack up fast
- •Exchange failures or manipulation can trigger unfair liquidations