Leverage

Leverage means trading with borrowed funds so that your position is larger than the capital you put up, multiplying both gains and losses. It is expressed as a ratio: 5x leverage controls a position five times your margin, so a 1% price move changes your equity by roughly 5%.

For example, with $1,000 of margin at 10x leverage, you control a $10,000 BTC position. If BTC rises 5%, you gain about $500 — half your margin. If BTC falls 10%, your $1,000 is wiped out and the exchange liquidates the position, usually before the loss exceeds your collateral.

Crypto exchanges offer leverage through margin trading and perpetual futures, sometimes at very high multiples. High leverage dramatically shrinks the price move needed to liquidate you: at 50x, a roughly 2% adverse move can end the trade, and normal crypto volatility makes such moves routine. A common misconception is that leverage improves a strategy; it only scales the outcome of the same strategy while adding liquidation risk, funding costs, and pressure to make emotional decisions. Most experienced traders who use leverage at all use modest amounts with strict stop-losses.