The basic mechanic
Leverage lets you control a position larger than your actual capital. At 10x leverage, a 1% price move becomes a 10% move on your account. Gains are multiplied by 10 — and so are losses.
Distance to liquidation
The higher the leverage, the closer liquidation sits to your entry. At 10x, roughly a 10% adverse move puts you near liquidation; at 50x, roughly a 2% move does the same. That means ordinary market volatility alone can be enough to wipe you out.
High leverage creates a false sense of safety
- Being able to control a large position with little capital feels like "low risk" — it isn’t
- What actually shrank isn’t the risk — it’s the room before liquidation
- Higher leverage should mean a tighter stop, not a looser one, to keep the risk balanced
Compare it yourself with your log
Log leverage alongside every trade, and after some time, split your win rate and P&L by leverage bracket. Most traders discover, in their own data, that performance is actually worse in the brackets where they used higher leverage.
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