Understanding Leverage in Perpetual Futures Trading

Leverage in perpetual futures trading allows traders to control a significantly larger position with a relatively small amount of capital. This means that even with a modest investment, traders can amplify their potential gains. For example, with 10x leverage, a $1,000 investment can control a $10,000 position. However, leverage also magnifies potential losses, which can exceed the initial investment if the market moves unfavorably. Managing leverage requires careful risk management, including setting stop-loss orders and maintaining sufficient margin to avoid liquidation. Proper understanding and cautious use of leverage are crucial for maximizing benefits while minimizing risks in perpetual futures trading.