What Are Leverage and Futures?
Leverage means using borrowed funds to amplify your trading position: for example, with 10x leverage, 1,000 yuan can control a 10,000 yuan position. Futures are a type of derivative trading with leverage that allows you to "go long" (bet on price increases) or "go short" (bet on price decreases).
What Is Liquidation?
When the price moves against you and your losses approach your margin, the exchange will forcefully close your position to prevent you from owing more—this is called "liquidation," where your principal goes to zero. The higher the leverage, the smaller the price move needed to trigger liquidation.
Spot vs Futures: A Must-See Comparison for Beginners
| Spot | Futures (with Leverage) | |
|---|---|---|
| Buy what you can afford | Yes | No, can be amplified multiple times |
| Risk of liquidation | No | Yes, principal can go to zero |
| Maximum loss | Principal (if coin price goes to zero) | Principal (liquidation), plus fees/funding costs with high frequency |
| Suitable for | Everyone, especially beginners | Experienced traders with strict risk management |
Why Beginners Should Stay Away from Futures First?
- High volatility + high leverage = high risk of liquidation; beginners often lose their principal after just a few trades.
- Easy to get addicted, chase gains and sell on dips, leading to emotional trading and repeated losses.
- Spot trading is enough to learn the market and gain experience, without the risk of owing money.
This article is for risk education purposes only and does not constitute investment advice. Crypto futures carry extremely high risk; please proceed with caution.
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