Understanding Leverage

Leverage is one of the most powerful features of perpetual futures trading, but it's also one of the most misunderstood. In simple terms, leverage allows you to control a large position with a small amount of money.

Think of it like a down payment on a house. You might put down a small percentage of the total value to secure the property. In trading, leverage works similarly. If you use 10x leverage, you are essentially putting down 10% of the total position size, and Arcex provides the rest.

How Leverage Works in Practice

Let's say you have $1,000 in your account and you want to open a position in Bitcoin. Without leverage, you could only control $1,000 worth of Bitcoin.

However, with 10x leverage, your $1,000 can now control a $10,000 position. This means that for every 1% the price of Bitcoin moves, your position's value changes by $100 (1% of $10,000), not just $10 (1% of $1,000).

Leverage	Your Capital	Position Size	1% Price Move Profit/Loss
1x	$1,000	$1,000	$10
10x	$1,000	$10,000	$100
50x	$1,000	$50,000	$500
100x	$1,000	$100,000	$1,000

As you can see, leverage can significantly amplify your potential profits. However, it's crucial to remember that it also amplifies your potential losses at the same rate.

A Word of Caution for Beginners

While the idea of multiplying your gains is exciting, leverage is a double-edged sword. Higher leverage means higher risk. A small price movement against your position can lead to significant losses and even liquidation (the automatic closing of your position).

With 100x leverage, even a 1% price move against you can wipe out your entire margin for that position (and in-turn, your account). This is an extremely high-risk strategy suitable only for the most experienced traders.

At Arcex, we offer a wide range of leverage options, from 1x up to 100x. We strongly recommend that beginners start with lower leverage (like 2x or 3x) until they are comfortable with the risks and dynamics of perpetual futures trading. Our goal is to empower you, and that starts with responsible trading.