# Leverage

Leverage is the ability to open a position larger than your account balance using borrowed funds from the exchange. Leverage increases both potential profit and losses.

Denoted as 1:10 or 10×. This means for every dollar you have, the exchange adds 9 more dollars.

### How It Works

#### Without Leverage (1×)

You have $1,000. Buy BTC at $50,000.

Price rises 10% to $55,000:

* Profit: $100 (+10%)

Price falls 10% to $45,000:

* Loss: −$100 (−10%)

#### With 10× Leverage

You have $1,000, open a position for $10,000.

Price rises 10% to $55,000:

* Profit: $1,000 (+100% of capital)

Price falls 10% to $45,000:

* Loss: −$1,000 (−100% of capital)

With a 10% drop, you lost all capital. Position is liquidated.

### Leverage Calculation

**Leverage = Position size / Your margin**

Examples:

* Position $10,000, margin $1,000 → leverage 10×
* Position $5,000, margin $1,000 → leverage 5×

**Required margin = Position size / Leverage**

For a $10,000 position with 10× leverage, you need $1,000 margin.

### Liquidation

When losses reach a critical level, the exchange forcibly closes the position. This is called liquidation.

**Example:**

You have $1,000 and 10× leverage. Long on BTC at $50,000.

Liquidation price: \~$45,500 (−9%). If the price drops to this level, you lose almost all capital.

The higher the leverage, the closer the liquidation price.

### Leverage and Risk

Approximate price movement until liquidation (depends on fees and margin type):

| Leverage | Price movement until liquidation |
| -------- | -------------------------------- |
| 2×       | \~50%                            |
| 5×       | \~20%                            |
| 10×      | \~10%                            |
| 20×      | \~5%                             |
| 50×      | \~2%                             |
| 125×     | \~0.8%                           |

With 125× leverage, a price movement of just 0.8% against you will result in total capital loss.

### ⚠️ Risks

**Rapid capital loss** — with 10× leverage, a 10% drop = 100% capital loss.

**Forced liquidation** — the exchange will close the position without your involvement.

**Funding fees** — on futures, you pay funding rate for holding the position.

**Emotional pressure** — high leverage creates stress.


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