In the cryptocurrency derivatives trading, '1000U open 10x leverage' and '2000U open 5x leverage' are two common operations. On the surface, both have a nominal value of 10000U (1000×10=10000, 2000×5=10000), but the risk logic and actual experience behind them are vastly different.
I. The Essential Difference Between Initial Margin and Risk Resistance
- Different margin bases: the former uses 1000U as the initial margin, while the latter uses 2000U. This means that the latter has a thicker 'safety cushion' and naturally higher tolerance for price fluctuations.
- Significant differences in liquidation thresholds:
In an ideal state (not considering fees and other losses), a position with 10x leverage will be liquidated to zero when the price reverses by 10%; while a position with 5x leverage needs a reversal of 20% to be liquidated.
In simple terms: 10x leverage is like walking a tightrope, while 5x leverage is walking on a wide road, with a whole extra margin of error.
II. The Impact of Hidden Costs in Actual Trading
In the real market, factors such as fees and funding rates will further widen the risk gap between the two:
- Fee loss: Assuming a fee rate of 0.1%, both operations will incur a deduction of 10U in fees (10000U×0.1%). At this point, the actual margin becomes 990U and 1990U, and the nominal values are accordingly reduced to 9900U and 9950U.
- Funding rate costs: In perpetual contracts, funding rates accumulate over the holding period. If calculated at a daily average of 0.15% (collected in 3 installments), the funding cost after holding for 10 days is approximately 49.5U (10x leverage) and 49.75U (5x leverage).
These losses will directly compress the risk resistance space, reducing the actual liquidation threshold for 10x leverage from 10% to about 9.5%, while for 5x leverage it drops from 20% to about 19.5%.
III. Additional Impact of Platform Risk Control Rules
Exchanges set a 'maintenance margin ratio' (usually 0.5%) to prevent liquidation risk, meaning that when the margin ratio falls below this value, forced liquidation will be triggered, rather than waiting for the margin to drop to zero. This rule further amplifies the difference between the two.
- The actual liquidation volatility for 10x leverage may drop to around 9%;
- The actual liquidation volatility for 5x leverage is approximately 19%.
In other words, in extreme market conditions, the risk resistance of 10x leverage is reduced to 90% of its theoretical value, while 5x leverage can still maintain nearly 90% of its theoretical risk resistance.
IV. Summary: The Core Logic of Leverage Choice
The essential difference between opening 10x leverage with 1000U and 5x leverage with 2000U lies in the **thickness of the risk buffer**:
- The former is suitable for aggressive traders who have strong insights into the market and pursue short-term high returns, but must be prepared for rapid stop-losses;
- The latter is more suitable for conservative players, who can withstand greater price fluctuations and allow more time for judgment and action.
Leverage itself is neither right nor wrong; the key is to match one's risk tolerance and confidence in market judgment. Remember: the core of contract trading is not to amplify profits, but to **seek profits within controllable risks**—reasonable leverage choices allow one to go further amid volatility.
Before every round of eruption, the market is always quiet, but there are always people getting on board early and quietly profiting. This opportunity, don’t say I didn’t remind you in advance; internal test orders have already begun. Want to know what it is? You can ask, but I may not say!
