Leverage
Borrowed money used to control a larger position than your own capital would allow, amplifying gains and losses.
Leverage lets you trade with more than you put down. With 10x leverage, $1,000 controls a $10,000 position. A 5% move in your favor returns 50% on your stake. The same 5% move against you wipes out half of it.
Crypto exchanges have offered leverage as high as 100x or 125x, which is closer to a coin flip than an investment. The catch is liquidation: once losses eat your margin, the position is closed automatically and your collateral is gone. High leverage in a volatile market is the fastest way to zero.
Related terms
Trading with borrowed funds, posting collateral to open positions larger than your account balance alone.
LiquidationThe forced closing of a leveraged position when losses drop its collateral below the required minimum.
FuturesContracts to buy or sell an asset at a set price on a future date, often traded with leverage.
Perpetual SwapA futures contract with no expiry date, kept aligned to spot price by recurring funding payments.