Crypto Margin Trading: Leverage, Liquidation and the Arithmetic

What leverage is

You put up capital, the venue lends you the rest, and you control a position larger than your own funds. Gains and losses are calculated on the whole position and settle against your capital only. Ten times leverage means a one per cent move produces a ten per cent change in your money.

The lender is not taking that risk. When your capital is nearly exhausted the position is closed automatically. That is liquidation, and what remains of your margin is gone. The venue's exposure is protected by closing you out early, which is the mechanism the entire product rests on.

Approximate adverse move required to liquidate, before fees and the maintenance margin, which both bring it closer. The bar shows how much room the position has, and the point of the chart is how quickly that room disappears.

The asymmetry people miss

A fifty per cent loss requires a hundred per cent gain to recover. This is true without leverage and becomes decisive with it, because leverage makes the fifty per cent loss reachable from a small market move. A position liquidated at ten times leverage has not lost ten per cent of your capital; it has lost all of the capital committed to it.

That is the arithmetic. There is no strategy layered on top that changes it, and every description of leverage as a tool for amplifying returns is describing the half of the symmetry that sells.

The costs that run while you wait

Borrowed funds accrue interest, and perpetual contracts add a funding rate paid between the two sides at intervals. When the market is crowded on one side, holders of that side pay, sometimes substantially, and it compounds over days.

Neither cost appears in the unrealised profit figure the interface shows. A position that is flat on price for a week can be meaningfully down once funding is settled, which is how a trade that was right about direction ends up losing money.

Cross margin and isolated margin

Isolated margin confines a position's collateral to that position: liquidation costs you what you assigned to it and nothing else. Cross margin lets the whole account balance back every open position, which delays liquidation and puts everything at risk when it finally arrives.

Cross is presented as the more sophisticated setting and behaves as the more dangerous one for anybody not managing positions actively. Isolated is the sane default precisely because it caps the loss at a number you chose in advance, which is the only mechanism on this page that reliably works.

Liquidation is not the same as being closed at your stop

Both end the position and they are settled differently, which is a detail most people meet for the first time at the worst moment.

A stop is your instruction, executed against the book at whatever price is available. A liquidation is the venue protecting itself, and it usually carries a fee on top of the loss. Where the position cannot be closed at a price that covers the margin, the shortfall is absorbed by an insurance fund the venue maintains. If that fund is exhausted during a violent move, some venues recover the remainder from profitable traders on the other side, which is a possibility written into the terms and almost never mentioned in a guide.

The practical difference is control. A stop placed above the liquidation price ends the position on your terms, with the remaining margin returned and no penalty. Relying on liquidation as though it were a stop hands the timing, the price and the fee to the venue, and it is the mechanism through which a leveraged loss becomes larger than the arithmetic of the price move alone suggests.

Why the interface is not neutral

Leverage selectors default to values above one, position sizes are expressed in notional terms that make the real exposure less visible, and unrealised profit is displayed prominently while accrued funding is not. None of that is deceptive in a legal sense and all of it shapes behaviour.

The counter is to compute the numbers outside the ticket: what you are risking, what move liquidates it, and what the position costs per day to hold. If those three are not clear before the ticket opens, the ticket will supply an answer and it will not be yours.