Leverage, liquidation and stop-loss explained
Leverage is a loan from the platform. At x5 you control five times your own money. A 10% rise earns you 50%, but a 10% fall costs you 50%.
What liquidation is
If losses eat nearly all you put in, the position is closed by force and that money is gone. The price may well come back, but you are no longer in the trade. The higher the leverage, the closer that line.
| Leverage | Approximate fall to liquidation |
|---|---|
| x2 | about 50% |
| x5 | about 20% |
| x10 | about 10% |
| x20 | about 5% |
Exact figures depend on the platform's rules and fees. An ordinary daily swing in a volatile coin easily exceeds 5%.
Long and short
A long profits from a rise, a short from a fall. Shorts carry a special risk: a price can keep rising without limit, and your loss rises with it.
Stop-loss and take-profit
A stop-loss closes the trade by itself if the price moves against you by a set percentage. A take-profit locks in a gain. Decide your exit before you enter: it is far harder to think calmly once a trade is losing.
Where to start
Start without leverage and size each trade from your bankroll. Leverage does not turn a bad idea into a good one, it only shows you the result faster.