Updated 2026-07-25
Leverage is the ratio between position notional and the margin backing it. Ten times leverage means a position worth ten units of exposure per unit of margin posted. The common mistake is to think of it as amplifying returns. It is more useful to think of it as shortening the distance between the current price and your liquidation price.
At high leverage, a small adverse move exhausts the margin, and because maintenance margin tiers tighten with size, large positions have less room again. This is also why leverage matters at the market level rather than only the account level: when a whole cohort of traders uses similar leverage from similar entries, their liquidation prices land in the same neighbourhood, which is exactly the clustering a liquidation heatmap tries to capture. Aggregate leverage is visible indirectly through open interest and funding.