How leverage works
If you use 5x leverage, $100 can control a $500 position. If the position rises 10%, the gain is large relative to your margin. If it falls enough, the exchange may liquidate the position to protect borrowed funds.
This is why leverage is not just "more upside." It changes the risk structure of the trade.
Liquidation is the danger
A liquidation is forced closing. It can happen even if your long-term view is right, because the position cannot survive the short-term move. Crypto markets can wick sharply, especially around news, thin liquidity, and crowded trades.
Funding and fees matter
Perpetual futures often include funding payments between longs and shorts. These costs can add up. Fees, spreads, and slippage also matter more when size is larger.
Most beginners should learn spot trading basics before touching leverage.
FAQ
Can leverage make me lose more than I deposit?
Rules vary by platform and product. Some liquidate before negative balance, while others can involve additional obligations. Read the product terms before trading.
Is 2x leverage safe?
Lower leverage is less dangerous than high leverage, but it is still leverage. Position size, volatility, and liquidation distance matter.
Why do beginners get liquidated?
They often use too much size, ignore volatility, add to losing trades, or treat leverage as a shortcut rather than a risk tool.