Leverage lets you control a larger position than your capital would normally allow. With 10x leverage, $1,000 controls $10,000 worth of assets. It amplifies both gains and losses.

How Leverage Works#

When you use leverage, you're borrowing to increase your position size. You put up margin (collateral), and the exchange lends you the rest.

Example: You have $1,000. You use 10x leverage. You now control a $10,000 position. If the asset goes up 5%, your position gains $500 (50% return on your $1,000). If the asset goes down 5%, your position loses $500 (50% loss on your $1,000).

Without leverage, that same 5% move would only be $50.

Leverage Levels#

• At 1x there's no leverage, $1,000 controls $1,000.
• At 2x, $1,000 controls $2,000 and a 50% move liquidates you.
• At 5x, $1,000 controls $5,000 and a 20% move liquidates you.
• At 10x, $1,000 controls $10,000 and a 10% move liquidates you.
• At 20x, $1,000 controls $20,000 and a 5% move liquidates you.
• At 50x, $1,000 controls $50,000 and a 2% move liquidates you.
• At 100x, $1,000 controls $100,000 and a 1% move liquidates you.

Higher leverage means less room for error.

Why Traders Use Leverage#

Capital efficiency. You don't need $100,000 to take a $100,000 position. Leverage lets smaller accounts access bigger opportunities.

Amplified returns. If you're right about direction, leverage multiplies your gains.

Hedging. You can hedge a larger spot portfolio with a smaller amount of capital using leveraged shorts.

The Risks#

Amplified losses. Leverage works both ways. A 10% gain becomes a 100% gain at 10x, but a 10% loss becomes a 100% loss, which means liquidation.

Liquidation. If the trade moves against you far enough, you lose your entire margin. No second chances.

Fees compound faster. Trading fees and funding are based on position size, not margin. Higher leverage means higher fees relative to your capital.

Emotional pressure. Watching a leveraged position swing wildly is stressful. Many traders make bad decisions under that pressure.

Leverage and Position Sizing#

Smart traders don't think about leverage in isolation. They think about position size relative to their account.

• Bad approach: "I'll use 20x leverage because I want big gains."
• Good approach: "I want to risk 2% of my account on this trade. Based on my stop loss distance, what position size does that translate to? And what leverage does that require?"

Start with how much you're willing to lose, then work backward to position size and leverage.

Leverage on Mirrorly#

When you copy trade on Mirrorly, you're not directly choosing leverage. You're setting allocation and position sizing rules. The effective leverage depends on your settings.

If you allocate $1,000 to copy a trader and set your max position size to $5,000, you're effectively using up to 5x leverage. If you set it to $10,000, that's 10x.

The trader you're copying might use high leverage, but your exposure is determined by your settings, not theirs. This is important. You can copy an aggressive trader with conservative settings.

How to Use Leverage Safely#

Start with low leverage (1 to 2x) until you understand how it feels. Monitor your positions and understand where your liquidation price is. Use stop losses well before your liquidation point. Don't use leverage to "make up" for losses. And size positions based on risk, not on how much leverage is available.

Leverage is a tool. Like any tool, it can build or destroy depending on how you use it. Most blown accounts aren't from being wrong about direction. They're from using too much leverage and not having room to be temporarily wrong.