What Is Leverage Trading?
Leverage trading is a method that allows you to trade with a larger amount than your actual capital. By depositing a fraction of the total position value as collateral (margin), you borrow funds from the exchange to increase your exposure. For example, with 10x leverage you can hold a position worth ₩10,000,000 while only putting up ₩1,000,000.
How Leverage Works
Suppose you invest ₩1,000,000 with 10x leverage — your actual position size becomes ₩10,000,000. If the price rises 5%, your profit is ₩500,000 (50% of your capital). Conversely, if the price falls 5%, your loss is also ₩500,000 (50% of your capital). Because leverage amplifies both gains and losses, it is truly a double-edged sword.
Risk Comparison by Leverage Multiplier
The higher the leverage, the less room you have before liquidation. Check the table below to see how much price movement it takes to reach liquidation at each multiplier.
| Leverage | Price Move to Liquidation | Risk Level | Recommended For |
|---|---|---|---|
| 2x | ~50% | Low | Long-term investors |
| 5x | ~20% | Medium | Intermediate traders |
| 10x | ~10% | High | Experienced traders |
| 25x | ~4% | Very High | Professional traders |
| 50x | ~2% | Extremely High | Professional scalpers |
| 100x–125x | ~0.8–1% | Maximum Risk | Not recommended for regular use |
Long and Short Positions
In leverage trading, you can bet on both price increases and decreases.
- Long position: Entered when you expect the price to rise. A profit is generated when the price increases after opening the position.
- Short position: Entered when you expect the price to fall. A profit is generated when the price decreases after opening the position.
- Two-way trading: One of the key advantages of futures trading is the ability to find profit opportunities in both bull and bear markets.
Key Tips for Leverage Beginners
Essential tips for those just getting started with leverage trading.
- Practice with paper trading first: Always practice with simulated trading before committing real capital.
- Start with low multipliers: Begin with 2–3x leverage and increase it gradually as you gain experience.
- Manage your position size: Use no more than 10% of your total assets for leverage trading.
- Always set a stop-loss: Set a stop-loss on every position without exception.
- Don't let emotions drive decisions: Increasing leverage to recover losses is extremely dangerous.
Practice Safely on TradeHub
TradeHub's paper trading lets you practice leverage trading up to 125x with a virtual balance of 10,000 USDT, completely free of charge. Because it is based on real-time Binance prices, you can develop a genuine feel for leverage trading in a live-market environment with zero risk.
