What Is Leverage in Crypto Trading? How 10x Turns 1% into 10%

Leverage and margin defined

Leverage lets you hold a position larger than the capital you deposit. The capital you deposit is called margin — collateral the exchange holds while the position is open. The full size of the position is its notional:

notional = margin × leverage
margin = notional ÷ leverage

Example: with 1,000 USD of margin at 10x, you hold a position with a notional of 10,000 USD. You have not been given 9,000 USD to keep — you have borrowed exposure, and the PnL of 10,000 USD worth of the asset is applied to your 1,000 USD collateral.

• Leverage does not predict anything or change the asset's price.
• It changes the speed of PnL relative to your collateral.
• It also shortens the distance your collateral can survive an adverse move.

The same trade at 1x, 5x, 10x and 25x

Assume the notional is fixed at 10,000 USD and price moves 1%. PnL on the notional is the same in every case — 100 USD — but the return on margin changes because the margin posted differs:

This is the whole mechanism behind "10x turns 1% into 10%". The same 1% move also works against you: at 25x, a 1% move the wrong way removes one quarter of the margin. Two facts often missed:

• Fees are charged on notional. A round-trip fee of 0.1% on 10,000 USD is 10 USD — 1% of the 1,000 USD margin at 10x, 2.5% of the 400 USD margin at 25x. The position starts from a deeper hole at higher leverage.
• Funding is charged on notional. Recurring funding payments are explained in the funding rate guide; relative to a small margin they arrive fast.

Initial margin vs maintenance margin

Two different margin requirements run at different times:

The maintenance requirement is lower than the initial requirement, so after opening, a position can lose some collateral before triggering anything. But it cannot lose all the way back to zero margin — at 10x, with illustrative fees ignored, an adverse move approaching roughly 10% (less in practice, because of the maintenance requirement and fees) consumes the allowed collateral and liquidation begins. The exact process is the subject of the liquidations pillar.

Isolated vs cross margin: what is at stake

The margin mode decides which funds can be consumed before a position closes:

• Isolated margin. Only the margin explicitly assigned to the position is at risk. Losing positions are normally closed at that margin; other funds in the wallet are untouched. Lower exposure, but adding margin is manual.
• Cross margin. The position can draw on the entire margin wallet — including other available balances — to satisfy maintenance requirements. This gives more buffer, but funds beyond the original position margin are now at risk.

Isolated caps what one position can consume; cross shares the whole wallet's risk. The mode does not improve the trade — it changes which of your funds pay for being wrong.

On cross margin, several losing positions can drain one shared wallet simultaneously. On isolated margin, an underfunded position liquidates earlier instead of pulling in other assets.

Liquidation distance by leverage tier

Holding one unit of notional and ignoring fees and funding for clarity, the approximate adverse move that consumes the margin is the reciprocal of leverage — in real trading it is always less due to maintenance margin, fees and funding:

At 125x, a move smaller than 1% — smaller than normal noise in many contracts — reaches the margin limit. A stop order is also not guaranteed to execute at its price during gaps, so "planned" exit prices can be skipped. The mechanics of what actually executes are in the liquidation guide.