Glossary
Leverage
Using borrowed funds or margin to control a position larger than the capital put up, which enlarges both gains and losses.
Leverage is usually written as a ratio such as 5x or 10x: the size of the position divided by the margin committed to it. It is common in futures, options and margin accounts.
Profit and loss are calculated on the full position, not on the margin. A small price move therefore becomes a large percentage of the trader’s own capital, in either direction.
Higher leverage also leaves less room before the margin is used up, which is what triggers a liquidation in crypto derivatives markets.
Related terms
For education only, not financial advice. Crypto assets and stocks are volatile, and leveraged positions can lose more than the money you put in.