How Leverage Works
When you trade with 10x leverage, you can control a position worth 10 times your deposited capital (margin):
- Your capital: $1,000
- Leverage: 10x
- Position size: $10,000
- If price goes up 5%: You profit $500 (50% return on your $1,000)
- If price goes down 5%: You lose $500 (50% loss on your $1,000)
Leverage Across Markets
| Market | Typical Leverage | Max Leverage |
|---|---|---|
| Crypto (offshore) | 1-125x | 200x (MEXC) |
| Crypto (regulated) | 1-5x | 50x (Kraken) |
| Forex (EU/UK) | 1-30x | 30x (retail) |
| Forex (unregulated) | 1-500x | 1000x |
| Stocks (USA) | 1-2x | 4x (portfolio margin) |
| Futures | 1-20x | Varies by contract |
The Leverage Spectrum
Low Leverage (2-5x)
- Suitable for beginners and swing traders
- Price can move 20-50% before liquidation
- Lower fees from smaller borrowed amounts
- Recommended for most traders
Medium Leverage (5-20x)
- For experienced traders with risk management
- Price can move 5-20% before liquidation
- Common for day trading strategies
- Requires active position monitoring
High Leverage (20-100x+)
- For expert traders only
- Price moves of 0.5-5% can cause liquidation
- Primarily used for scalping very small moves
- Extremely high risk of total loss
Why High Leverage Is Dangerous
A common misconception is that high leverage means high profits. In reality:
- 100x leverage: A 1% price move against you = liquidation
- 99% of traders using 100x+ leverage lose their entire position
- Fees and slippage are proportionally larger
- Emotional decision-making increases with higher stakes
Leverage and Margin Relationship
Leverage and margin are inversely related:
- 2x leverage = 50% initial margin required
- 10x leverage = 10% initial margin required
- 100x leverage = 1% initial margin required