Leverage lets you control a position larger than the money you put down. At 5x, $100 of margin controls a $500 position, and every gain and every loss scales by that same multiple.
It's the most misunderstood word in trading and the most dangerous one to misunderstand, because people remember the multiplied gains and forget the multiplied losses. The math takes two minutes, and it decides where your liquidation price sits.
A worked example
Say you have $100 of margin, the money you post to back a position. At 5x leverage, that $100 controls a $500 position. That's all 5x means: position size divided by margin equals five.
Now move the price. If the market rises 2 percent, your $500 position gains $10. Against your $100 of margin, that's a 10 percent gain from a 2 percent move, which is why leverage feels like magic on a good day.
The double edge
The same math runs in reverse, at the same speed. If the market falls 2 percent, the position loses $10, and 10 percent of your margin is gone from a 2 percent move. At 5x, a 20 percent drop against you wipes out the margin entirely. At 10x, a 10 percent drop does. At 20x, 5 percent.
Look at what those numbers imply. The market doesn't need to crash for a leveraged position to die. Ordinary weekly volatility is enough at high multiples. Leverage doesn't change the market. It changes how much of the market you can survive.
Leverage and your liquidation price
When your margin is nearly gone, the position is closed automatically. That's liquidation, and the price where it happens is your liquidation price. Higher leverage puts the liquidation price closer to your entry. Lower leverage pushes it further away. The full mechanics are in what is liquidation.
This is why Based shows you the liquidation price before you open a position, not after. It tells you how far the market can go against you before the position is gone, and when leverage is involved it's the most useful number on the screen. Adjust the leverage and watch it move: that's the trade-off, made visible.
Using leverage sensibly
Use low leverage or none. A position at 1x or 2x behaves close to holding the asset, with room for a bad week. Size positions so that a liquidation would be annoying, not ruinous. Check the liquidation price every time you open or add to a position. And remember leverage is optional. Nobody checks whether you should be using it, so you're the risk department.
For the wider picture of the instrument, including funding fees, margin and why these markets track prices, read the perpetual futures guide. Perps are derivatives, so you get no dividends or voting rights, you carry liquidation risk, and you pay or receive funding while positions are open. If you haven't picked a direction yet, long vs short covers that.