Leverage is like a double-edged sword, cutting out profits as well as greed.

Every time the market experiences intense fluctuations, you can always hear this kind of voice in the community: "Got wiped out again, leverage really damn harms people!" Over the years, high leverage has been almost demonized, as if it is the main culprit for liquidation. People avoid it, hate it, curse it.

But I have to be honest: danger has never been in the tool itself, but in the hands holding the tool.

Six years ago, when I entered the crypto space, I lost six figures overnight. That feeling was so intense that I wanted to swallow leverage whole. It wasn't until later that I realized—it's not the leverage itself, but that I, as a trader, was still too inexperienced. Just like a race car driver can drift through a turn at 200 mph, a rookie driving a regular car at 40 mph will hit a tree. The tool is not at fault; it’s whether the operator’s skill matches.

The mathematical logic behind high leverage

When the market starts moving, if the spot price rises by 5%, and you are correct in your judgment, using high leverage can double your returns. This is not gambling psychology; it’s pure mathematics.

Here's a practical example: with 1000 yuan, using 5x leverage, you are controlling a position of 5000 yuan. If the price rises by 10%, you earn 500 yuan—that’s a 50% return on your principal. Conversely, if it drops by 10%, your 1000 yuan principal is gone, and you get liquidated.

Leverage itself does not carry good or evil attributes; it’s just a multiplier of capital. In markets like Bitcoin, which are extremely volatile, those who use leverage demonstrate strong self-control and risk awareness. They never treat leverage as gambling chips; instead, they see it as a refined art of risk management.

But why do the vast majority still get liquidated? Looking at the data makes it clear—that over 90% of liquidators simply don’t understand the true nature of leverage.