Leverage Trading for Beginners
A practical guide to Leverage, Margin, and Liquidation risk.
Leverage allows you to control a large position with a small amount of capital. It is powerful because it amplifies both profits and losses.
How Leverage Works
With 10x Leverage, $100 controls a $1,000 position. If price moves 1%, your PnL moves 10%.
If Price Goes Up 5%
- No leverage: +$5 (5%)
- 10x Leverage: +$50 (50%)
- 25x Leverage: +$125 (125%)
If Price Goes Down 5%
- No leverage: -$5 (5%)
- 10x Leverage: -$50 (50%)
- 25x Leverage: -$125 (LIQUIDATED)
Leverage Levels Explained
| Leverage | Risk Level | Best For |
|---|---|---|
| 2-5x | Low | Swing trades, beginners |
| 5-10x | Medium | Day trades, experienced |
| 10-25x | High | Scalping, pros only |
| 25x+ | Extreme | Gambling (not recommended) |
The Truth About High Leverage
Reality Check
100x leverage means a 1% move against you = 100% loss = complete liquidation. Even in stable markets, 1% swings are common. High Leverage is not a shortcut to wealth; it is a shortcut to zero.
5 Rules for Using Leverage Safely
- 1.Start with 3-5x maximum as a beginner
- 2.Always calculate liquidation price before entering
- 3.Use isolated margin to limit losses
- 4.Set Stop Loss before entering the trade
- 5.Never add to a losing position (no averaging down)