Glossary

Leverage: What Does it Mean? Is 10x or 100x Always Better?

FoxPress Editorial · 2026-04-22 · 13 min read

Leverage amplifies both profits and losses; beginners should avoid any leverage in their first year. Start with spot trading on the Binance Official Website to get familiar with the market. Features for Futures and Margin trading are highly visible on the Binance Official APP. For regional switching instructions, refer to Binance App Download. Let's break down what leverage actually is.

One-Sentence Definition

Leverage = Using 1 USDT to trade 10 USDT or even 100 USDT worth of assets.

Mathematical Examples

Principal	Leverage	Actual Position	BTC Rises 1%
1000 USDT	1x	1000 USDT	+10 USDT
1000 USDT	5x	5000 USDT	+50 USDT
1000 USDT	10x	10000 USDT	+100 USDT
1000 USDT	100x	100000 USDT	+1000 USDT

A 1% price increase with 100x leverage doubles your principal.

However, the reverse is true:

Principal	Leverage	BTC Drops 1%
1000 USDT	100x	-1000 USDT (Liquidation)

A 1% drop means your entire principal is gone.

The Concept of Liquidation

"Liquidation" = Your principal has been completely lost in a leveraged trade.

Leverage	Reverse Movement Required for Liquidation
1x (No Leverage)	100% Drop (Very rare)
5x	20% Drop
10x	10% Drop
50x	2% Drop
100x	1% Drop

BTC price fluctuations of ±5% per day are normal. With 100x leverage, liquidation is highly likely within hours.

The "Leverage Illusion"

Beginners are often tempted by the thought that "100x leverage can yield 100x profit." But consider:

The probability of liquidation at 100x is extremely high.
99% of users who use 100x leverage see their balance go to zero within a week.
Only professional traders can successfully perform short-term arbitrage.

For a beginner, using 100x leverage is "gambling," not "investing."

Common Types of Leverage

Type 1: Futures Leverage

Binance "Futures" products come with built-in leverage, typically ranging from 1x to 125x.

Type 2: Margin Trading (Spot Margin)

Borrowing assets to go long or short on the spot market:

Borrow USDT to buy more BTC (Long)
Borrow BTC to sell (Short)

This usually caps at 10x leverage, making it more moderate than Futures.

Type 3: Leveraged Tokens

Tokens like "BTC3L" come with built-in 3x leverage. They won't liquidate but suffer from "rebalancing decay."

Risk Comparison of Leverage Types

Type	Risk Level
Margin Trading	Medium (Up to 10x, manageable)
Futures	Extremely High (Up to 125x, instant liquidation)
Leveraged Tokens	Medium (No liquidation, but long-term decay)

Beginners should stay away from all of these initially.

Funding Rates

Futures (specifically Perpetual Futures) use a "Funding Rate" mechanism:

Occurs every 8 hours.
Longs and shorts pay each other.
Rates can be positive or negative.

If you hold a position long-term, funding rates will eat into your capital:

Long position + Positive rate → You pay.
Short position + Negative rate → You pay.

Beginners don't need to understand the math deeply; just remember: "The longer you hold, the higher the cost."

Maintenance Margin

Futures also involve a "Maintenance Margin Rate":

Your Principal / Position Value.
If it falls below a threshold, your position is liquidated.
Thresholds vary by leverage and asset.

For example, with 10x leverage on BTC, the maintenance margin rate might be around 0.5%. This means your principal cannot drop below 0.5% of the total position value, or you will face liquidation.

"Safety Rules" for Using Leverage

If you insist on using leverage (which is not recommended for beginners):

Rule	Explanation
Max 5x	Keep it low enough to survive volatility.
Use Stop-Loss	Essential to prevent total loss.
Position < 30%	Don't go "all-in."
No Overnight Holds	Sudden news can cause overnight liquidations.
Single Asset	Don't trade multiple coins simultaneously.

When Do Professionals Use Leverage?

Leverage has legitimate uses:

Hedging (using futures to offset spot risk).
Arbitrage (delta-neutral strategies).
Capital Efficiency (institutional financing strategies).

Beginners do not typically fall into these categories.

The "Survivorship Bias" of Leverage

You might see stories on social media like "I made 10x with 100x leverage":

Most are just bragging about a lucky win.
Those who lose everything don't post videos.
Most who go to zero simply vanish in silence within months.
What you see is survivorship bias.

Difference Between Leverage and Gambling

Technically, there isn't much difference for a beginner:

Leverage amplifies randomness.
Long-term participation often leads to negative expected value.
It requires "luck" more than "skill."
It creates immense psychological pressure.

Beginners should treat leverage as gambling and simply avoid it.

A Checklist to "Avoid Leverage Temptation"

[ ] Profitable in spot trading for >1 year (>10% gain).
[ ] Finished reading "Market Wizards" or similar trading logic.
[ ] Have a developed trading system.
[ ] Disciplined in position management and stop-loss rules.
[ ] Stable mindset (not emotional after losses).

Only when these are met should you consider 3-5x leverage. If not, don't touch it.

FAQ

Q: What is 1x leverage?
A: It is equivalent to spot trading; there is no leverage involved.

Q: Will I owe the exchange money after a liquidation?
A: In extreme market conditions, a "negative balance" (auto-deleveraging) could occur, but Binance has an "Insurance Fund" to cover this. Regular users generally don't owe money out of pocket.

Q: Is low leverage (2-3x) safe?
A: It is relatively safer but still carries risk. Beginners are still advised to avoid it in their first year.

Q: Can I use leverage in spot trading?
A: You can via "Margin Trading." Regular spot trading does not support leverage.