Season 1Episode 192:21
10x leverage: more money, or more risk?
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Key takeaways
100 of margin controlling a 1,000 position is 10x leverage.
Price moves act on the position, and your margin takes the result.
With the same position size, changing leverage changes the margin, not the P&L.
Quick check
A 1,000 position moves 1% against you, ignoring fees. About how much do you lose?
Try it yourself
Choose 'fixed margin' and then 'fixed position' mode, and watch the money P&L after a price move.
Show the answer
With fixed margin, higher leverage enlarges the notional position. With a fixed position, money P&L doesn't grow automatically.
Transcript
- Sam
If I use ten times, does the exchange give me 900?
- Nexubo
It's not free cash. Simply put, 100 of margin controlling a 1,000 position is 10x leverage. Price moves act on the position, and your margin takes the profit or loss.
- Narrator
Ignoring fees, a 1% move against you loses about 10 on a 1,000 position, and about 20 on a 2,000 position. The percentage looks small, but on a small margin it can hurt.
- Nexubo
Here's an easy mistake. If the position size stays the same and you only change the leverage setting, the P&L in money for the same price move doesn't double. What changes is the margin required and your risk buffer.
- Narrator
Real liquidation also involves maintenance margin, the mark price and fees. You can't say 10x always liquidates at exactly a 10% drop. Don't use this shortcut for real trades.
- Sam
No.
- Nexubo
It magnifies how the position hits your money, not your judgement.
- Narrator
You still have margin left. So why can you be forced out? Next: the line you can't see.
- Narrator
Understand first, then act.