Leverage
Leverage means trading a position larger than your own money: the exchange supplies the rest and you post margin as security. Profit and loss are calculated on the whole position, so a small price move produces a large result in either direction.
How it works
At 10× you post a tenth of the position and trade the whole of it. Every percent the price moves becomes ten percent of your margin, gains and losses alike.
Losses come only out of your share, never the exchange's. The moment your own funds fall below the maintenance minimum the position is force-closed. That is liquidation, and it happens without you.
Perpetual contracts add a funding rate: every few hours one side of the market pays the other. Holding a position for long means paying that separately, even when the price has not moved.
How wrong you can afford to be
How far the price must move against you before the margin is gone. Maintenance margin 0.5%.
| 5× leverage | ≈ 19.5% |
| 10× leverage | ≈ 9.5% |
| 20× leverage | ≈ 4.5% |
| 50× leverage | ≈ 1.5% |
Bitcoin covers 1.5% in minutes and 9.5% within hours of an ordinary day. High leverage therefore turns a trade into a bet on a short window rather than an investment.
How to handle it
- Know the liquidation price firstThe exchange shows it immediately. If it falls inside a normal daily range, the leverage is too high.
- Isolated marginIt caps the loss at one position. Cross margin puts the entire account balance at risk.
- A stop above liquidationA stop closes at your price and leaves part of the margin. Liquidation leaves nothing.
- Leverage is not position sizingTaking 10× on a tenth of your capital and 1× on all of it carry different risk, even though the position size matches.