Leverage Definition - Glossary

Leverage is borrowing funds to increase trading position size and amplify potential profits or losses.

Leverage is a financial tool that allows traders to borrow funds to increase their trading position size. By using leverage, traders can control a larger position than their initial capital would allow. This can amplify both potential profits and potential losses. In crypto exchanges, leverage ratios vary, often ranging from 2x to 100x or more. While leverage can offer significant gains, it also increases the risk of substantial losses if the market moves unfavorably. Proper risk management is crucial when trading with leverage to avoid liquidation.