Skip to content
Risk ManagementInteractive

Leverage

Using borrowed capital to control a position larger than your account balance.

Also called: leveraged · gearing · 10x

In plain language

Leverage is expressed as a multiple. At 10x, $1,000 of your own capital controls a $10,000 position. Every price move is amplified by that same factor against your equity.

Leverage does not change the percentage move of the asset. It changes what that move does to you. A 2% adverse move on a 10x position removes 20% of your capital.

Crucially, leverage does not have to increase risk. Leverage sets how large a position you can hold; your stop distance and position size set how much you can lose. Used deliberately, leverage lets a small account hold a properly sized position it could not otherwise fund.

The formula

Position Value

Account Capital × Leverage

Effective leverage
Position Value ÷ Account Equity
Loss on equity
Price move % × Leverage

Change the numbers

This is the concept as a working tool. Edit any field and watch what moves — that relationship is the thing worth remembering.

Try it yourself
Position Value
$10,000
Effect On Your Equity
-20%

If price moves 2% against you

Move To Liquidation
10%

Before fees and maintenance margin

Leverage does not change the asset's move — it changes what that move does to you. At 10x, roughly a 10% move against the position wipes out the margin behind it.

Size a leveraged position with a real stop

Seen on a chart

One thousand dollars of capital controlling a ten thousand dollar position at ten times leverage$1,000YOUR CAPITAL10×$10,000POSITION VALUEA 2% MOVE AGAINST THE POSITION−$200= −20% of your capitalThe asset moved 2%. Your equity moved 20%.
Leverage multiplies the size of the position and therefore the effect of every price move on your capital. It does not change the odds.

Why it matters

Leverage is the fastest route to a margin call, and also the tool that makes correct position sizing possible on a small account. Which one it is depends entirely on whether a stop is attached.

Common mistakes

  • Treating available leverage as a target rather than a ceiling.
  • Sizing to maximum leverage and leaving no margin buffer for normal fluctuation.
  • Forgetting that leverage magnifies the loss but never the accuracy of the idea.

Put it to work

Size a leveraged position properly

Keep exploring

These concepts are connected. Understanding one usually makes the next one easier.

MarginRisk Management

The capital your broker requires you to post to open and hold a leveraged position.

Margin CallRisk Management

A broker demand for more capital when account equity falls below the required minimum.

Position SizeRisk Management

The amount of an asset you buy or sell in a single trade.

Notional ValueRisk Management

The total market value of a position — size multiplied by price.

Liquidation PriceCrypto

The price at which a leveraged position is forcibly closed because margin is exhausted.