Leverage trading can amplify both profits AND losses. You can lose MORE than your initial investment. Never trade with money you can't afford to lose.
What is Leverage Trading?
Leverage Definition
Leverage allows you to control a larger position with a smaller amount of capital. It's essentially borrowing funds from the exchange to increase your trading power. With 10x leverage, $100 controls $1,000 worth of assets.
How Leverage Multiplies Everything
| Leverage | Capital | Position | +5% Profit | -5% Loss | Liquidation |
|---|---|---|---|---|---|
| 1x | $1,000 | $1,000 | +$50 (5%) | -$50 (5%) | -100% |
| 5x | $1,000 | $5,000 | +$250 (25%) | -$250 (25%) | -20% |
| 10x | $1,000 | $10,000 | +$500 (50%) | -$500 (50%) | -10% |
| 25x | $1,000 | $25,000 | +$1,250 (125%) | -$1,000 (100%)* | -4% |
| 100x | $1,000 | $100,000 | +$5,000 (500%) | -$1,000 (100%)* | -1% |
*Liquidated before full loss is realized
Key Terms
👆 Click cards to reveal definitions
Start with low leverage (2-5x) until consistently profitable. High leverage is for experienced traders who have mastered risk management.
Long vs Short Positions
Unlike traditional investing where you can only profit when prices go up, leverage trading allows you to profit in both directions.
- Bet: Price will go UP
- Action: Buy first, sell later
- Profit when: Exit > Entry
- Example: Buy BTC $60K, sell $65K = +$5K
- Bet: Price will go DOWN
- Action: Sell first, buy back later
- Profit when: Exit < Entry
- Example: Short BTC $60K, cover $55K = +$5K
When to Go Long vs Short
- Price is in an uptrend (higher highs, higher lows)
- Price bounces off support level
- Bullish chart patterns form
- RSI shows oversold with reversal signals
- Price is in a downtrend (lower highs, lower lows)
- Price rejects from resistance
- Bearish chart patterns form
- RSI shows overbought with reversal signals
Margin & Liquidation
Types of Margin
- ✓ Only that position's margin at risk
- ✓ If liquidated, only lose that margin
- ✓ Better for beginners
- ⚡ Recommended for learning
- ✓ Entire account is collateral
- ✓ Harder to liquidate
- ⚠️ Can lose entire account
- ⚡ For experienced traders
Interactive Margin Gauge
When liquidated, you lose your entire margin instantly. Always use stop-losses BEFORE the liquidation price!
Understanding Exchanges
CEX vs DEX
- ✓ Higher liquidity, faster execution
- ✓ User-friendly interfaces
- ✓ Fiat on/off ramps
- ⚠️ Requires KYC
- 📍 Binance, Bybit, OKX
- ✓ You control your funds
- ✓ No KYC required
- ✓ Transparent on-chain
- ⚠️ Higher learning curve
- 📍 dYdX, GMX, Hyperliquid
Order Types
| Order Type | What It Does | When to Use |
|---|---|---|
| Market | Executes immediately at best price | Need to enter/exit NOW |
| Limit | Executes only at your price or better | Want specific entry/exit |
| Stop-Loss | Triggers when price hits level | Protect against losses |
| Take-Profit | Auto-closes at profit target | Lock in gains |
Liquidity & Order Books
What is Liquidity?
Liquidity = how easily an asset can be bought/sold without affecting price. High liquidity = tight spreads, fast fills, minimal slippage.
Order Book Visualization
Liquidity Depth Comparison
Lot Sizes & Position Sizing
In Forex, positions are measured in lots. Understanding lot sizes is essential for risk management.
Trading Calculators
Position Size Calculator
Leverage Calculator
Pre-Trade Checklist
Complete this BEFORE every leveraged trade.
Knowledge Check
Key Takeaways
Leverage is a tool, not a strategy. Master risk management BEFORE using leverage.
- Leverage — Borrow to control larger positions (with greater risk)
- Long vs Short — Profit from both up and down markets
- Margin — Your collateral; understand isolated vs cross
- Liquidation — Always set stop-loss BEFORE liquidation price
- Liquidity — Trade high-volume pairs to minimize slippage