Leverage is a powerful tool in trading that allows you to control a larger amount than your actual capital.
In other words:
You are trading with more money than your actual capital… but your risk increases by the same amount.
🔥 How does leverage work? (A simple and clear explanation)
If you have 10 dollars and used a 10X leverage:
🔹 The trade size becomes = 100 dollars
🔹 Any profit or loss is multiplied by 10 times
Quick example:
Market moves +1%
⇒ Your profit becomes +10%
Market moves -1%
⇒ Your loss becomes -10%
The higher the leverage… the faster the profit and loss.
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📌 Types of financial leverage in Binance
1️⃣ Funded spot trading (Margin):
Low leverage is usually between 3X and 5X, suitable for limited risks.
2️⃣ Trading perpetual contracts (Futures):
High leverage can reach up to 20X – 50X – 100X depending on the currency.
This type is what many ask about because it is profitable… and dangerous.
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⚠️ What about liquidation?
The biggest risk in leverage is liquidation.
If the price moves against you by a small percentage, your position may be completely closed, and you may lose your capital.
Example:
Your balance is 10 dollars
Opened a 100X position
A drop of only 0.5% could liquidate your account.
