Perpetual contract leverage: A mathematical game with the devil
When a beginner stares at the 100x leverage button on the exchange, the greed in their eyes and the trembling of their fingers resemble a gambler at a casino betting all their fortune. Unfortunately, this is not courage, but a misunderstanding of mathematics. Just yesterday, a brother cried out: 'I went long on BTC with 30x leverage, but it dropped 1% in the early morning and I got liquidated.' He doesn't realize that leverage is not for reckless gambling; it is for calculation.
The essence of leverage: What you think is a shortcut is actually a cliff.
Exchanges package leverage as a 'wealth accelerator', but won't tell you the deadly formula behind it. For example:
With 100x leverage, opening a long position of 1 BTC (current price 100,000U) requires only 10U margin.
30x leverage, margin 32U.
1x leverage, 1000U.
Looks like 100x is the most cost-effective? But if BTC drops 1% (1000U), your 10U will be wiped out. The real logic of leverage should be: Leverage Ratio = (Principal × Safety Margin) ÷ (Price × Volatility Coefficient), not 'just go all in'.
Liquidation price: your lifeline, you must know how to calculate it.
Liquidation price formula:
Liquidation price = Opening price × [1 - (Margin × (1 - Maintenance Margin Rate)) / (Number of Contracts × Contract Value)]
Assuming you open 1 BTC with 100x leverage, margin 10U, maintenance margin rate 0.5%:
Liquidation price = 100000 × [1 - (10 × 0.995) / 100] = 90000.5U
This means you'll only get liquidated if BTC drops 10%, which is much safer than 5U margin. Leverage is not about being high; it's about keeping the liquidation price away from market volatility.
Different capital amounts play differently: 500U and 50,000U are worlds apart.
1. Small capital (<1000U): 10-20x is the limit
500U principal for 100x? You'd be wiped out with a 2% fluctuation in BTC. The right way to play:
10x leverage, each position not exceeding 20% (100U).
The liquidation line is set outside ±8%.
Remember: You have to stay alive to turn things around; if you die, you lose everything.
2. Medium capital (1k-10kU): 5-10x, seeking stability for victory
5000U principal, don't waste it:
5x leverage, single position ≤30%.
3% trailing stop loss, withdraw after a 3% loss, don't hold on stubbornly.
Check the margin daily, don't wait until liquidation to regret.
3. Large capital (>10kU): 1-3x, institutional trading
For true big players, leverage is just a seasoning:
2x leverage, liquidation line is outside ±50%.
Supplement margin when it drops, don't gamble your life.
Hedging and arbitrage, steady as an old dog.
Survival rules during a crash
But what are the smart people doing?
Reduce leverage in advance (100x → 20x).
Tiered stop loss (sell 20% for every 1% drop).
Do not resist the trade, do not fantasize.
The iron rule of leverage
🚫 Single position ≤20% of principal
⏳ Calculate the liquidation price before opening a position, take a screenshot!
📉 5% volatility? Recalculate the margin!
⚖️ Leverage Ratio = 1 / (Expected Maximum Drawdown × 2)
Next time you want to click 100x leverage, ask yourself: 'If BTC drops 3%, can I still survive?' In the crypto world, those who last long are not the boldest, but those with a clear mind. Leverage is a double-edged sword; used well, it brings gains; used poorly, it brings losses.
Follow the profile, never lose your way
