Beginner guide · Non-custodial

Leverage on Perpetuals: What It Changes and What It Does Not

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What leverage actually controls

Most new traders approach the leverage slider assuming it acts as a risk dial: slide it up, and every price move will generate bigger gains or losses. This is the core misconception about leverage.

Leverage is the ratio of your total position size to the margin you commit to hold that position. The slider does two equivalent things: it changes how much margin is tied up for a fixed position size, or how large a position you can open with a fixed amount of margin. It does not change how much money you gain or lose when the price moves. That is determined entirely by your position size.

Two positions of the exact same size will have identical gains and losses for any given price move, even if one uses lower leverage and a larger margin amount, and the other uses higher leverage and a much smaller margin amount. The leverage number itself has no direct impact on the market risk of the position.

On Trending, the minimum margin to open a position is $20, so you can test very small position sizes without committing a large portion of your balance, regardless of the leverage you choose.

The table below compares two positions of identical size, one with lower leverage and one with higher leverage, to show what changes and what stays the same:

How leverage affects liquidation price

Liquidation is the automatic closure of a position by the exchange when unrealized losses eat through all the margin you committed to that position. It exists to limit your loss to the margin you put up, though extreme market volatility can cause slippage that results in larger losses in rare cases.

For a fixed position size, raising leverage reduces the amount of margin holding the position open. This smaller margin buffer means a smaller adverse price move is enough to wipe out the margin, so your liquidation price moves closer to your entry price. Lower leverage, by contrast, commits more margin to the position, creating a larger buffer that pushes the liquidation price farther from entry.

The same relationship holds if you keep your margin amount fixed: higher leverage creates a larger position, so losses grow faster for each unit of price movement, and liquidation triggers after a smaller adverse move.

The biggest practical risk of higher leverage is not that the position is inherently more risky (if size is held constant), but that temporary, sharp price spikes (called wicks) can trigger liquidation before the price reverses back in your favor, even if your original trade thesis is correct. This is a real risk that catches many new traders off guard.

On Trending, the liquidation price is displayed clearly before you confirm your position, so you never have to guess how close you are to automatic closure.

It is important to note that perpetual futures carry inherent liquidation risk that spot trading does not. If your priority is holding an asset long-term with no risk of automatic closure from price volatility, a spot exchange is a better fit than Trending or any other perpetual futures platform.

The same risk can be expressed with low or high leverage

Because position size is the only driver of market risk, you can express the exact same level of risk with either low or high leverage. You do not need to use high leverage to take small, controlled risks — a small position size with low leverage carries the same risk as that same small position size with high leverage. The choice is about capital efficiency and liquidation buffer, not about how much you stand to gain or lose.

For example: if you want a small position that carries limited risk, you can open it with lower leverage and a modest margin amount, or with higher leverage and a much smaller margin amount. The loss for any given adverse price move is identical. The only tradeoffs are how much of your account is tied up for that single trade, and how much room the price has to move against you before liquidation.

Many new traders assume "low leverage = safe", but this is only true if you keep your margin amount the same. If you use lower leverage but pour most of your account into the position as margin, you will end up with a very large position size — and very high risk. Conversely, high leverage with a tiny margin amount can result in a small, low-risk position, but with a closer liquidation price.

A concrete way to pick your leverage instead of guessing

New traders often slide the leverage bar to a random number, or max it out because it feels exciting, then build the rest of the trade around that choice. This is backwards. Leverage should be the last parameter you set, after you have defined your risk.

Follow this step-by-step method to pick a leverage level that aligns with your trade plan, no guessing required:

1. Define your maximum acceptable loss first. Decide the total amount of money you are willing to lose on this single trade. This should be an amount that would not impact your daily finances or your ability to keep trading, even if you lose 100% of it. Never risk more than this, no matter how confident you feel.
2. Set your stop loss based on your strategy. Pick the price level where you will exit the trade if it moves against you, to cap your loss at your maximum acceptable amount. Your stop should be based on your trading logic — for example, just below a key support level for a long position — not on leverage or margin constraints.
3. Calculate your position size. Work out how large your position can be so that a move from your entry price to your stop loss results in exactly your maximum acceptable loss. This position size is the true measure of your risk on the trade.
4. Set leverage to put liquidation past your stop. Adjust the leverage slider so that the liquidation price is clearly beyond your stop loss level. This ensures that if the trade goes against you, you will exit voluntarily at your stop before you ever risk liquidation. Leave a comfortable buffer between your stop and liquidation price to account for temporary price wicks that might briefly spike past your stop.

If you are brand new to perpetual trading, err on the side of a wider buffer and lower leverage until you are comfortable with how liquidation works. If you cannot monitor your positions regularly, or if you are trading an extremely volatile asset, lower leverage (or spot trading) is a more appropriate choice.

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