What is Leverage?
Trading with borrowed funds to amplify position size — and losses. The mechanism behind "liquidation": the exchange force-closes your position when losses approach your collateral.
Leverage is trading with borrowed money: put up collateral, borrow against it, control a position several times your stake. Gains multiply; so do losses — and crypto adds the mechanism that makes leverage lethal here: liquidation. When losses approach your collateral's value, the exchange force-closes the position automatically. In an asset class where ±5% days are routine, 10× leverage converts a normal Tuesday into a total loss.
Liquidation cascades are also a market force: forced selling triggers more liquidations, which is how crypto produces its trademark sudden wicks. The sober statistics from every derivatives market are that the overwhelming majority of leveraged retail traders lose. This site's calculators assume unleveraged holdings for a reason; if you use leverage anyway, the position size question is simply "what loss ends the experiment?", because on a long enough timeline volatility finds every liquidation price.
See it in practice
Related terms: Stop-loss · Liquidity · full glossary
FAQ
What does "liquidated" mean in crypto?
Your leveraged position was force-closed because losses reached your collateral. Unlike ordinary investing where a dip can be waited out, liquidation makes the loss permanent regardless of what price does next.
Is any leverage amount sensible?
The honest framing: leverage compresses your survivable range of ordinary volatility. At 2× a 50% move wipes you; at 10×, 10% does — and 10% moves are routine here. Most people using leverage are answering "how fast can I lose this" without asking it.
General information only, not financial advice. Definitions are maintained in our fact database and reviewed with the daily rebuild.