Leverage: why beginners blow their account in a day

7 min read · What leverage, margin and liquidation are. An example in numbers and a rule for your first months.

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Short version for experts: tables, lists and screenshots only.

Words in this lesson (8)

Stop — A price chosen in advance at which the trade is closed at a loss, so the loss doesn't grow bigger.

Spot — Ordinary buying and selling of the coin or stock itself: you buy it — it's yours.

Futures — A contract on the price of an asset. You don't receive the coin itself — you gain or lose on the price change. Lets you short and use leverage.

Leverage — Money borrowed from the exchange. With 10x leverage, your $100 opens a $1,000 position: both profit and loss are ten times bigger.

Margin — Your own money that the exchange locks as collateral for a leveraged position.

Liquidation — The exchange force-closes a position when the loss has eaten all the collateral. The collateral is lost.

Volume — How much money or how many units changed hands over a period. A move on high volume is more reliable than one on low volume.

DEMO — The DEMO account in MAMAY: prices and fees are real, orders don't go to the exchange, and no real money is at risk.

What leverage is

Leverage is money the exchange lends you for the duration of a trade.

You have $100. With 10x leverage you open a $1,000 trade: your $100 plus $900 of the exchange's money.

	No leverage	10x leverage
Your money	$100	$100
Trade size	$100	$1,000
Price up 5%	+$5	+$50
Price down 5%	−$5	−$50
Price down 10%	−$10	−$100 — everything

Leverage multiplies both profit and loss by the same amount.

Margin and liquidation

Your $100 in such a trade is called margin — it's collateral. The exchange doesn't want to lose its $900, so it watches closely: as soon as the loss has almost eaten the collateral, it closes your trade itself. This is called liquidation.

After liquidation the collateral is gone. Not "in the red" — simply gone.

With 10x leverage, a move of about 10% against you is enough. For crypto, 10% is an ordinary day. With 50x leverage, 2% is enough — that can happen within a minute.

Why leverage is so addictive

Because when it goes your way it looks like magic: +$50 instead of +$5. A person wins a couple of times, raises the leverage, increases the size — and one trade takes everything.

That's not trading, that's gambling. The difference is simple:

Gambling	Trading
"All in, it's definitely going up now"	you know in advance how much you'll lose if you're wrong
more leverage to get there faster	leverage only so you don't keep extra money on the exchange
after a loss — double down	after a loss — a pause
results are remembered "roughly"	every trade is recorded and reviewed

MAMAY is built for the right-hand column. If you catch yourself in the left one, that's nothing to be ashamed of, but it's important to notice. The learning section has "My trades: review" — it shows such habits on your own history.

Rules for your first months

Leverage no higher than 3x. Better yet, no leverage until you've made 30 trades.
A stop in every trade. The stop must trigger before liquidation.
No more than 1% of the account at risk per trade. How to calculate it — the "Risk" lesson in the "Getting started" track.
DEMO first.

Leverage doesn't make you richer. It makes the result come faster — good or bad. For a beginner, bad happens more often.

▶ The "Risk" lesson ▶ Next: spot and futures

This is how it looks in MAMAY: “Terminal”

Leverage: why beginners blow their account in a day

What leverage is

Margin and liquidation

Why leverage is so addictive

Rules for your first months

Learn where you trade