Leverage
In short Leverage is trading a position larger than your own capital, through borrowing or margin, which magnifies both gains and losses.
Leverage means holding a position larger than the capital you put up. It is expressed as a multiple: at 10x, $100 of your own funds controls $1,000 of exposure. Profits and losses are calculated on the full position size, not on your deposit. On margin accounts and lending protocols this works through an actual loan, while on perpetual futures the exchange simply tracks your exposure against the margin you posted, without lending you the rest of the position's value.
You post collateral, usually called margin, and the platform sets a liquidation price. Theoretically, at 10x a 10% move against you uses up the margin, and at 20x it takes only 5%. Those figures describe pure margin exhaustion, though. Because of maintenance margin requirements and fees, liquidation usually triggers before that point. Depending on the platform, liquidation can be partial or leave a small remaining balance, but you should expect to lose most of the margin plus a liquidation fee.
Holding a leveraged position also has ongoing costs. Margin accounts charge borrow interest. Perpetual futures use funding payments that flow between longs and shorts, so depending on the funding rate and your side of the trade, you may pay or receive them.
This matters a lot with small-cap tokens. They can move 20% or more in an hour, and thin liquidity produces sharp wicks that spike through a price and snap back. A leveraged long can be liquidated by a wick that reverses minutes later, leaving you out of a trade that would have been right. Forced liquidations also add selling or buying pressure, which can push the price further and trigger more of them.
Before opening a leveraged position, check the liquidation price and how far it sits from the current price. Find out whether the margin is isolated, meaning only that position is at risk, or cross, meaning the eligible collateral in that margin account backs all your positions there. Look at fees, the funding or borrow rate, and whether liquidation uses the last traded price or an oracle price. Common traps are using high multiples on illiquid tokens, adding collateral to a losing position, and treating a leveraged trade like a spot purchase you can simply wait out.