Leverage and liquidation: how not to lose your deposit
What leverage does to profit and loss, and why a position can be force-closed.
How leverage works
Leverage lets you open a position larger than your funds. At 10x, a $100 deposit controls a $1000 position. A 1% price move changes the result by 10% of the deposit, up or down.
What liquidation is
If the loss eats your collateral, the venue closes the position by force. That is liquidation. A rough long estimate without fees: entry price × (1 − 1 / leverage). At 10x that is a drop of about 10% from entry, in practice sooner because of fees and maintenance-margin rules.
How to cut the risk
Pick leverage so the liquidation price sits far beyond your stop.
Always use a stop-loss and size the position from risk, not from the profit you want.
Do not average down a leveraged loser: it is a fast road to liquidation.
Remember funding: in perpetual futures it can make holding a position costly.
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