Margin vs Leverage: what each one means

Margin or leverage: the short answer

They are two sides of one trade. Position size = margin × leverage. If you keep the position the same and put in more margin, leverage falls; if you keep margin the same and raise leverage, the position grows.

Profit and loss follow the position size, not the margin. At 10x, a 1% move equals 10% of your margin; at 50x it equals 50%.

Margin vs Leverage: the numbers

Key differences between margin and leverage

• Margin is an amount; leverage is a ratio.
• Margin sets the most you put at risk in the position; leverage sets how fast that risk is used.
• Higher leverage brings the liquidation price closer to the entry price.
• Margin trading is the wider practice of borrowing to trade; leverage is the number that describes it.

Margin: pros and cons

• Pros: Caps how much you commit to one trade.
• Pros: Can be posted in crypto on BRVX.
• Cons: More margin at the same size means more capital tied up.
• Cons: Crypto used as margin can itself move in price.

Leverage: pros and cons

• Pros: Small capital controls a large position.
• Pros: Makes small moves meaningful.
• Cons: Losses grow as fast as gains.
• Cons: High leverage leaves little room before liquidation.

How to set them

Decide the position size from your stop-loss and the amount you accept to lose, then choose leverage that gives that size with room to spare. The position size calculator does this math.

What margin means in leveraged trading

Margin is collateral. It is the part of your own money that is locked while a position is open. It is not a fee and it is not spent when you open the trade. When you close the position, the margin is released with your profit added or your loss taken out.

Margin is also not the same as the money in your account. You can hold a larger balance and commit only part of it to one position. The locked amount is what backs that single trade. What happens to the rest of your balance depends on how the platform handles risk, so check this before you open a trade.

While the trade is open, the value behind your margin changes with the price. A gain adds to it and a loss takes from it. If losses use up too much of it, the position is closed. This is called liquidation.

What leverage really measures in margin trading

Leverage measures exposure. It tells you how many dollars of price movement you carry for each dollar of margin. At 10x, you carry $10 of market exposure for every $1 you locked.

The leverage you pick is the ratio at the moment you open. After that, the price moves and the real ratio drifts. If the trade goes against you, your margin shrinks while the position stays about the same size, so the real leverage rises. If the trade goes your way, it falls. This is why a losing trade gets riskier the longer it runs.

Leverage does not change the market. A 2% move is still a 2% move. Leverage only changes how large that move is compared with the money you put up.

Margin vs leverage: a worked example with the same position

Here is an example with round, illustrative numbers. Two traders both open a $1,000 long position on the same market. Trader one uses $200 of margin, which is 5x. Trader two uses $50 of margin, which is 20x.

The position is the same size, so the price move costs both of them the same dollars. What differs is how much of their margin that loss takes. Trader two has far less room before the margin is used up.

• Price falls 1%: both lose $10. That is 5% of trader one's margin and 20% of trader two's.
• Price falls 2%: both lose $20. That is 10% against 40%.
• Price falls 5%: both lose $50. Trader one has lost a quarter of the margin. Trader two's margin is gone.
• Price rises 5%: both gain $50. Trader one earns 25% on margin, trader two 100%, with the same dollar gain.
• Fees and funding are left out here to keep the math clear. They reduce both results.

How leverage changes fees and funding costs

Trading costs on a perpetual contract follow the position size, not the margin. A perpetual contract is a contract that tracks a price and has no expiry date. With $100 of margin at 50x, you pay fees on a $5,000 position, not on $100.

On BRVX, fees start from 0.05% per side, and you pay once to open and once to close. At the same rate, a $5,000 position costs five times more to trade than a $1,000 position. Measured against the margin, higher leverage makes each round trip more expensive.

Funding works the same way. It is a regular payment that keeps the contract price close to the market price. On BRVX it is charged every hour on most markets, and long and short positions both pay it. A large, highly leveraged position held for days can lose a noticeable part of its margin to funding alone, even if the price does not move.

Common margin and leverage mistakes

Most losses tied to leverage come from a few repeated habits. They are easy to spot in a trade log once you know what to look for.

• Picking leverage first and position size second, instead of starting from the stop-loss.
• Treating the maximum leverage as a target rather than a limit.
• Reading profit as a percentage of margin and forgetting that the dollar risk is set by the position size.
• Setting a stop-loss so far away that the position is liquidated before the stop is reached.
• Ignoring fees and funding, which grow with the position size.
• Posting a volatile coin as margin and not counting its own price move.
• Opening several leveraged positions at once and not adding up the total exposure.

How margin and leverage work when trading on BRVX

BRVX offers synthetic perpetual contracts on 41 markets across crypto, US and Asian stocks, commodities, forex and an index. Prices are quoted in USDT. You trade the price only. You do not own the coin, share or commodity, and there are no dividends, voting rights or delivery.

You can post margin in USDT, USDC, BTC, ETH, SOL or BNB. If you use a coin other than a stablecoin, the value of your margin moves with that coin as well as with your trade. Leverage starts from 5x on every market and goes up to 150x on some. Each market has its own cap in the live tariff.

You can go long or short with a market order and add a take-profit and a stop-loss. Leveraged trading carries a high risk: you can lose the whole margin of a position, so only open a trade with money you can afford to lose. BRVX is not available to US persons.