Margin, size and leverage
With leverage you put up margin and control a larger position. A 10x long with $100 of margin controls $1,000 of bitcoin. If bitcoin rises 5%, the position gains $50, a 50% return on your margin.
- The same 5% fall loses $50, half your margin.
- Leverage is size divided by margin: $1,000 ÷ $100 = 10x.
How liquidation works
Your losses come out of your margin. Before they exceed it, the platform closes the position for you: that is a liquidation. Most platforms do this before the margin is completely gone, keeping a buffer called maintenance margin.
- At 10x, a move of about 10% against you uses up the whole margin; liquidation can come at a smaller move.
- At 2x the same wipe-out needs roughly a 50% move, which is why lower leverage survives normal volatility.
Fees and funding eat into margin
Trading fees are charged on the full position size, not on your margin. A 0.1% fee on a $1,000 position is $1 to open and about $1 to close, which is 2% of a $100 margin. Many real perpetual futures also charge or pay a funding rate between longs and shorts at regular intervals.
- Check the fee schedule and funding history before holding a leveraged trade for days.
- Count fees when working out your break-even price.
Use take profit and stop loss
A stop loss closes the trade at a price you choose, so you decide the maximum loss instead of the liquidation engine. A take profit locks in a gain at your target. In fast markets the fill can be worse than the price you set.
- Set the stop loss before the liquidation price, not after it.
- Size the trade so a stop-loss hit is a loss you can accept.
Rules in Australia
ASIC’s product intervention order for contracts for difference limits retail CFDs over crypto-assets to 2:1 leverage and requires negative balance protection. Offshore platforms offering higher leverage may not be covered by Australian protections.
- Check whether a product is a CFD, a futures contract or something else, and who regulates the provider.
- If you are unsure, practise first with paper money.
Practise in the Nodora League
The Nodora League lets you open longs and shorts up to 10x with paper money, set take profit and stop loss, and see profit or loss after fees as you type. Positions are liquidated when losses reach 90% of margin, so you can learn the feel of it without real losses.
- Try the same trade at 2x and 10x and compare the liquidation prices.
- Paper results cannot be withdrawn and are not financial advice.
Your next steps.
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Sources & fact check
Checked . Provider material describes the provider’s own service. Check current terms before acting.
- ASIC media release 20-254MR: product intervention order strengthens CFD protections
- Scamwatch: investment scams
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Practise leverage in the paper trading League →Prefer to understand fees first? Crypto fees explained →