There is a particularly typical scenario:
When a newbie registers an account, the first thing they see isn't spot trading, or learning the basics of candlestick charts and volume/price relationships; instead, it's a string of bright, shiny numbers on the futures page:
10x、20x、50x、100x……
His eyes lit up instantly:
"Wow, I can leverage such a large position with just a little bit of money?"
Isn't this giving ordinary people a chance to turn their lives around?
And then you know the story:
They came as "dreamers".
They didn't even have time to warm their principal before they left.
In this article, we will clarify two of the most crucial concepts:
What is a margin deposit?
What is leverage?
Why does Xiaobai love playing with the most dangerous things right from the start?
I. What is a margin deposit? — Your "underwear" that you're betting on the table.
First, translate the technical terms into plain language.
◼ What is a security deposit?
You can understand it as:
You borrowed an even bigger knife from the market.
The platform said: Okay, but you have to put some of your "underwear" here first.
The money deposited there is the margin.
The position you actually control is much larger than your margin.
However, as long as the market reverses to a certain extent...
This little bit of "underwear" will be lost, and the system will directly help you.Forced liquidation
Here's a very rough example (just to help you understand, not a precise calculation formula):
You put up 1000 U as a deposit
Leverage 10 times
You can then open a position with a nominal value of approximately 10,000 USDT.
This 1000 U is your "health bar" in this battle.
When your health bar is depleted, you're out of the game.
II. What is leverage? — While amplifying returns, it also amplifies risks.
The word "leverage" sounds very positive:
"Leverage a larger world" and "Amplify efficiency".
In trading, it can be translated into a very simple sentence:
Leverage = using a small amount of money to amplify the control of your position by a multiple.
2x leverage:
You have 1000 U, but you're using it as if it were 2000 U.
10x leverage:
You have 1000 U, but you're using it as if it were 10000 U.
100x leverage:
You have 1000 U, treat it as 100000 U in a gamble.
Doesn't that sound awesome?
The appeal lies in:
If you go in the right direction, the returns will be magnified proportionally.
If the price increases by 1% without leverage, you earn 1%.
With 10x leverage, a 1% increase means you earn approximately 10%.
But don't forget:
If the direction is wrong, it will be magnified proportionally as well.
If the price drops by 1% without leverage, you will lose 1%.
With 10x leverage, a 1% drop means you lose approximately 10%.
Wrong direction + slightly larger fluctuations
Your deposit is gone.
Many people verbally understand this logic,
The moment I actually placed the order, only one thought echoed in my mind:
"What if it's right?"
—This is where the problem begins.
III. Why do beginners love using leverage right from the start? Three key aspects of human nature are revealed.
You can observe a pattern:
The more new and inexperienced someone is, the better.
The more you like to use high leverage.
Why? Because it aligns perfectly with human nature.
1) With limited capital and grand ambitions, leverage may seem like a "shortcut."
For most newbies, the reality is like this:
Limited disposable funds
I also have a strong urge to "turn things around".
Seeing others post about their seemingly simple profits of tens or hundreds of times their initial investment makes my blood pressure spike.
At this point, the lever appears:
"You only have 1000 U? No problem, I'll magnify it for you 50 times."
With this mindset, a novice will automatically simplify the logic as follows:
Without leverage: fluctuations of one or two hundred are not worth noting.
Leverage: Even a few points of fluctuation can make the numbers very exciting.
He wasn't looking at the risks.
He was using leverage to compensate for the helplessness he felt due to the lack of real funds.
2) Focusing only on the pleasure of "getting it right once" while completely ignoring the cost of "getting it wrong ten times".
Human nature has a very typical weakness:
For such a rare and great pleasure
The perception is far superior to that of high-frequency small deaths.
What's the meaning?
Get it right the first time, and you'll remember it for a lifetime with double the screenshots.
The other N instances of margin calls and losses in half were quickly "selectively forgotten."
So you will see many people:
Use high leverage
I've had several margin calls.
What they kept talking about in the group was those one or two "miracle plays".
His brain was telling him:
"Look, I have talent. With a little adjustment, I can turn things around quickly."
This is a typical gambler's mindset:
Remember the good times, ignore the costs of disaster.
3) The platform's interface is so smooth that you might think it's just "adjusting the speed."
To put it more realistically—
From a product design perspective:
Leverage ratio is often displayed as a prominent drop-down menu or slider.
It's very simple to modify, and incredibly smooth.
Some platforms will even default to giving you a fairly high multiplier.
Many beginners are completely unaware that:
I'm not changing a "UI parameter".
Instead, it modifies the upper limit of "how much I can lose on this bet".
Each time you slide the lever slider
They are all personally reducing the "error tolerance" of their own accounts.
IV. The Cruelest Truth:
You think leverage "amplifies profits," but it actually "exhausts the number of times you can make mistakes in advance."
This sentence is very important, so I'm highlighting it separately.
Without leverage:
You have 1000 U
Even if you lose 2%–3% each time, you can still carefully review your performance and gradually make changes.
Even if you make several mistakes in a row, as long as you don't add to your position or go all in, you still have time to adjust.
But if you're used to leverage of 20x, 50x, or even higher:
The market fluctuates normally over several candlesticks.
Your margin has been penetrated.
Direct margin call, forced liquidation, kicked out of the game in one fell swoop.
What high leverage really does is shorten the time you can "survive," practice, and make mistakes in the market.
And a newbie who just entered the game
What's needed most is precisely time and practice opportunities.
You deliberately burned them in the most efficient way.
5. How should margin and leverage be used in a way that is considered "adult use"?
It's not that you can't touch it,
Instead, you should at least do these things 👇
1) Think it through first:
"Even if I lose all of this deposit, can I afford to live like this now?"
You are using:
Real spare money
Or is it living expenses, borrowed money, or money intended for other things?
If you can't even face this?
It's best to avoid high leverage, and even avoid rushing into contracts.
2) At the beginning, did you dare to admit that you were a "primary school student"?
The correct way for beginners:
Start with small leverage or even no leverage.
Practice first: Analyze trends, draw lines, set stop-loss orders, and manage position size.
Expose and correct the mistakes made when "losing small amounts of money".
A truly mature person will say to themselves:
"I'm here to pay my tuition."
Tuition fees can be kept at 1000 U, instead of 10000 U.
Xiaobai reversed it:
"I only have this much money, so I have to go all out."
The result is:
A trial and error process within a controllable scope.
One person gambled their entire stake on their life.
3) Learn to use "multiples" to deduce your error tolerance.
In the future, when you click on leverage, don't just look at "how fast you can make money".
Try asking yourself three questions:
At this multiple
If the market moves a few points in the opposite direction, will I get wiped out?What is the normal fluctuation range for this coin/asset?
It can't withstand a 2% or 3% reversal.
If it fluctuates frequently by 5%–10% within the day,
And the multiplier you used is:
That would be like strapping yourself to a bomb.
After this explosion,
Will I have another chance to adjust, learn, and improve?
If you answer honestly,
You will be more cautious about this multiplier than before.
4) Use isolated margin trading whenever possible, rather than pooling your entire account balance.
Many beginners have the following habits:
All positions in one account share the same margin (cross-margin mode).
One of the transactions had very poor risk control, which could drag the entire account down with it.
A healthier approach is:
Use isolated margin trading:
How much deposit am I willing to put up for this order?
The worst-case scenario is losing everything on this trade, but it won't wipe out the entire account.
This is just like doing business:
I won't put all my assets on a single order.
Instead, it's about controlling the maximum loss for each order.
VI. Therefore
Let me help you pack up your things for today in three sentences:
Deposit = Your health bar in this battle.
Leverage = How much you cut your own health bar thin.High leverage is not a "sophisticated way to play".
It's like giving you a pair of roller skates before you can even walk.What you really need is to survive long enough in the market.
Instead of sprinting like crazy in the first few months.
(Trading for Beginners 101) This series
It helps you break down these things that "look cool but are actually the easiest to kill" one by one.
If you've already started using margin and leverage...
But I always feel:
The margin call came out of nowhere.
Stop-loss orders are always being triggered.
A normal fluctuation can wipe you out of the game.
Then come find me.
I will use a way you can understand.
Let me help you sort out this whole system of "position size, leverage, margin, and liquidation price".
As for whether you can use leverage as a "tool" instead of a "bomb" in the future...
It all depends on whether you're willing to curb your gambling instincts.
