CRYPTO GUIDANCE INC.

Kansas City, MO

What Is Leverage?

Leverage means trading with borrowed money so your position is bigger than your actual stake. Put up $1,000 at 5x leverage and you control a $5,000 position. Gains multiply by five. So do losses, and that second half is the part that empties accounts.

How It Actually Works

You post collateral, called margin, and the exchange lends you the rest. At 5x, a 20 percent move against you wipes out 100 percent of your margin, so the exchange force-closes the position before losses touch borrowed funds. That forced exit is a liquidation, and it is not a courtesy. It happens at the worst price, often with an extra fee.

Most crypto leverage lives in perpetual futures, where you also pay or receive a funding rate every few hours for holding the position.

The Math Nobody Runs

At 10x, a 10 percent adverse move liquidates you. Bitcoin moves 10 percent in a day several times a year. Small altcoins do it before lunch.
Crypto trades around the clock. A spike at 3 a.m. liquidates you exactly as thoroughly as one you were awake for.
Volatility plus leverage means time is against you: the longer you hold, the more certain you are to meet the one move that ends the position.

Risks and Common Mistakes

Sizing by maximum allowed leverage instead of by planned loss. My position size calculator does this properly.
Adding margin to a losing position, which converts a planned small loss into an unplanned big one.
Confusing conviction with edge. A real-world example of leverage eating a fortune is on my leverage case study page.

When It Matters

My honest position from the Trading page: never trade with leverage until you have proven you can trade profitably without it, and then still probably do not. Nothing on this site is a recommendation to open a leveraged position.