Leverage x10 vs x125: why traders lose money on futures

Leverage in trading is like taking a loan from the exchange for trading. Do you have $10? With x10 leverage, you trade as if you have $100. Sounds great, but here's the catch.

How it works

Imagine: you invested $10, chose a leverage of x10. The market rose by 1% — your position increased by 10%. You earned $1, not bad? But if the market fell by 1%, you lost that same $1. With a leverage of x125, these numbers become 125%… in both directions.

Where's the catch

Liquidation. The exchange will not allow you to lose everything to zero. When your position loses about 80% of the margin amount, automatic liquidation is triggered - the position is closed automatically, and your funds are taken.

Examples:

• x10: a 10% drop = a 100% loss of capital
• x125: a drop of only 0.8% = wrecked

Reality

High leverage works only if you know what you are doing. It wipes out newcomers in hours. Even pros use x5-x10 at most because volatility in crypto is no joke.

Tip: start with a small leverage, learn to read charts and manage risk. Then you can experiment. Haste is the enemy of your deposit.