Level 3 — Becoming a Better Trader
Leverage and liquidation
5 minute read
A small move has a bigger effect
Illustrative example · not live data
£100 margin · 10×
£1,000 exposure
1% move ≈ £10 gain/loss
Leverage means trading with borrowed money to multiply your position. With 10x leverage, £100 controls £1,000 worth of crypto.
The catch: losses are multiplied too. With 10x leverage, a 10% move against you wipes out your entire £100. The exchange automatically closes your position at that point — this is liquidation, and your money is gone.
Liquidations matter to everyone, even spot holders. When many leveraged traders get liquidated at once, their forced selling cascades and can crash the price for everyone. That's why this site shows real liquidation data on the charts — clusters of liquidations mark prices where forced buying or selling hit the market.
If you take one rule from this course: don't use leverage while learning. The overwhelming majority of leveraged beginners lose their stake.
Key points to remember
- Leverage multiplies gains and losses
- Liquidation = the exchange closes your position, stake lost
- Liquidation cascades move the whole market
- Avoid leverage while learning