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What is leverage in crypto trading?
Leverage is trading with borrowed money so a position is larger than the funds you put up. With 5x leverage, a deposit of 100 controls a position worth 500. Gains and losses are both multiplied by the same factor.
What it means for you
At 5x leverage, a 20% move against you can erase your whole margin, and the platform can close the position automatically before you can react. A regulator warns that leveraged traders can lose more than their initial investment. Check the liquidation price before opening a position, not after.
A common mistake: “With leverage I can only lose what I put in.”
In fact: Many platforms close a position before the margin runs out, but in fast markets losses can run past it. The CFTC warns leveraged traders may lose more than their initial investments.
How it works
On a leveraged venue you post margin and the venue supplies the rest of the position. Initial margin is the position size divided by the leverage: one tenth, or 10%, at 10x. The position must also keep margin above a smaller maintenance level; one venue sets it at half the maximum initial margin fraction. Because losses come out of margin that is only a fraction of the position, a move of somewhat less than 1 ÷ leverage against you can exhaust it. The CFTC notes traders are then forced to add margin or close out.
An example
Say you post 100 at 10x to control a 1,000 position. A 5% rise makes 50, a 50% return on your margin. A 5% fall loses 50, half your margin, and a move of under 10% against you can liquidate the position once the maintenance margin is counted.
Sources: CFTC: Understand the Risks of Virtual Currency Trading, Hyperliquid docs: Contract specifications · checked 4 October 2026
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Educational content, not financial advice. Written by hand and checked against the source named above. Something wrong? Tell us and we reply within two business days.