Leverage & Liquidation Basics: The One Thing to Calculate First

Leverage magnifies P&L and pulls the liquidation price toward spot. Knowing your liq price beats predicting direction.

2026-06-05

What leverage does 10x leverage means controlling

0 of position with

of margin. Price up 1%, you make 10%; down 1%, you lose 10%.

What liquidation price is When losses eat your margin, the exchange force-closes you — that price is your liquidation price. The higher the leverage, the closer it sits to spot: at 10x, roughly a 9–10% adverse move wipes you out.

The most common death Beginners stare at "how much can I make" but never compute "at what price do I get liquidated." Intraday 5–10% swings are routine in crypto; high leverage hands your position to noise.

The right order Before entering, use a liquidation calculator to find the liq price → judge whether normal volatility could reach it → then choose leverage and size accordingly, not the other way around. Always keep a buffer and set a stop-loss.