What is Leverage in Trading?
Leverage is borrowed exposure that lets you control a position larger than your own capital. Expressed as a multiple — like 10x or 100x — it multiplies both potential profit and potential loss. With 10x leverage, $100 of margin controls a $1,000 position, so a 10% move can double or wipe out your margin.
How leverage works
You post margin (collateral) and the exchange lets you open a position several times larger. The leverage multiple equals position size divided by margin. Higher leverage means a smaller price move can liquidate you.
Leverage and liquidation
The higher the leverage, the closer the liquidation price is to your entry. At 100x, a roughly 1% adverse move can liquidate the position. This is why high leverage is high risk and demands tight stop-losses.
Using leverage responsibly
Professionals often use modest leverage and size positions by risk, not by maximum available leverage. Practice different leverage levels on a simulator to feel how they behave before using real money.
Frequently asked questions
What does 100x leverage mean?
Your position is 100 times your margin. A ~1% move against you can liquidate it, making 100x extremely high risk.
Is high leverage good or bad?
Leverage is a tool. Used with strict risk management it increases efficiency; used recklessly it causes fast liquidation. Lower leverage is generally safer.
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