What is Leverage in Crypto Trading?

Adekunle Joshua

Leverage is a powerful tool used in Crypto trading to amplify potential gains and losses

In simple terms, leverage allows traders to borrow funds from a platform (often referred to as margin) to open larger positions than their own capital would permit

While leverage can magnify profits, it also increases risk

Higher leverage means even small market movements can lead to substantial gains or losses

With leverage, traders can take either long (buy) or short (sell) positions

Leveraged trading comes with a concept called liquidation. If the market moves unfavorably, and your losses approach the borrowed funds, the exchange may automatically close your position to prevent further losses