Leverage
Amplify with care — beginner, intermediate, and advanced.
Beginner — What is leverage?
What is leverage?
Leverage lets you control a larger position with less capital. 10× leverage means $100 controls $1,000. It amplifies both gains and losses.
Margin
Margin is the collateral you put up. Initial margin opens a position; maintenance margin keeps it open. Fall below maintenance and you get liquidated.
Liquidation
When losses exceed your margin, the exchange closes your position automatically. At 50× leverage, a 2% move against you wipes the position.
Practice vs. live
The mechanics here are real: margin calls and liquidation behave exactly as they would with your own money. Learn the risk side properly before committing funds.
Intermediate — Using leverage well
Position sizing
Risk a fixed % of equity per trade (e.g. 1%). Size the position so that if your stop is hit, you lose exactly that 1%.
Risk/reward
Aim for at least 1:2 risk/reward — risk $1 to make $2. With 1:2, you can be wrong 60% of the time and still profit.
Stop distance vs. leverage
Higher leverage = tighter effective stop. A 1% stop at 10× leverage is a 10% price move. Size the position so the stop is at a volatility-appropriate distance.
Over-leverage danger
Using max leverage because it is available is the #1 beginner mistake. Use the minimum leverage that fits your stop distance and risk budget.
Advanced — Leverage math
Effective leverage
Effective leverage = notional ÷ equity. A 10× position on 20% of equity = 2× effective leverage. Watch effective leverage, not the headline.
Liquidation price
Liquidation price = entry × (1 − 1/leverage) for longs (approx, before fees). At 50×, ~2% from entry. Fees and funding push it closer.
Funding cost
Perpetuals charge funding every 8h. At 0.01% per 8h, a 50× position costs 0.01% × 50 = 0.5% per 8h in funding. Over days this compounds.
Risk of ruin
Risk of ruin = probability of losing a fraction of equity. With 1% risk per trade and 100 trades, ruin probability is near zero. With 10%, it is near certainty.
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