Leverage lets you control a position larger than your margin. It is often described as a way to make more money, but what it really changes is how much margin you need, and how close you are to being liquidated.
What it doesn't change
For the same position quantity and a fill at the same stop, the planned price loss is the same at 2x or at 10x before costs. Actual loss may differ because leverage changes liquidation distance and collateral requirements; gaps or failed stops can exceed planned risk.
What it does change
- Higher leverage puts the liquidation price closer to your entry. If it sits before your stop, the exchange may close you out first.
- Fees and funding are charged on the full position, not just your margin.
- It becomes very easy to open a position far bigger than your plan allows.
A sensible habit
Work out the position size first, then use only as much leverage as you need to open it, and check that the liquidation price is well beyond your stop. Leverage magnifies losses as well as gains.