Leverage
Leverage is trading a position larger than your own funds by borrowing from the exchange or broker. 10x leverage multiplies both profit and loss by 10 and brings liquidation closer.
How it works
You put up collateral (margin), and the exchange or broker lends you the rest. At 10x, $100 opens a $1,000 position. Your result is based on the whole position, so a 1% price move changes your margin by 10%.
The higher the leverage, the smaller the move against you needed to wipe out your margin. At 10x that is about 10%, at 50x about 2%, and in practice a bit less because of maintenance margin and fees. When your margin runs short, the position is closed by force. That is liquidation.
Leverage is used in futures, margin trading and forex. It does not make a trade better, it only changes the size. What matters is not the leverage number but the risk: how much money you lose if your stop is hit.
A $100 deposit at 10x opens a $1,000 position. If BTC rises 5%, you make $50, which is +50% on your deposit. If it falls 5%, you lose $50, and at a drop of about 10% the position is liquidated and nearly all of the deposit is gone.
The most common mistake is using high leverage with no stop-loss, hoping to sit through a pullback. A normal 3–5% dip at 20x wipes out the whole position. First decide how much you can lose on the trade (say 1% of your account), set a stop, then pick leverage so liquidation sits well beyond the stop.
Questions and answers
What is leverage in simple terms?
It is a loan from the exchange that lets you open a trade bigger than your money. Profit and loss grow by the same multiple.
What leverage should a beginner use?
It is best to start with no leverage or a low one, like 2–3x, and always with a stop. High leverage leaves almost no room for error.
Can you lose more than your deposit with leverage?
On crypto exchanges you usually lose the position's margin when liquidated. With some brokers a sharp gap can push your balance negative, so check whether negative balance protection applies.
Related terms
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Updated: 2026-10-19