If it’s the first time you’ve heard the term “contract leverage,” you might already picture someone holding a lever, desperately trying to move a giant rock—either successfully prying it away, or getting crushed under it. In fact, this picture is the perfect metaphor for contract leverage.
What Is Contract Leverage?In plain words: using a small amount of money to control large capital—profits can come fast, but so can losses. Sounds exciting, right? Many people are drawn in by the thrill of “using small to win big,” but the ones who can walk away smiling are usually those who truly understand the rules, know how to use leverage, and know when to stop losses.
Today, let’s dive into a super detailed tutorial on contract leverage, from entry-level to advanced, breaking down complex knowledge into something simple and easy to grasp. By the time you finish this article, your understanding of contract leverage will be far deeper than that of most retail traders.
What Is Contract Leverage? Like a “Magnifying Glass” of Borrowed Power
Let’s skip the complex formulas for now and start with a life example:
You have 100U and can buy 10 rolls of fabric. You believe fabric prices will rise, but with your current capital, you can only profit from the price change of those 10 rolls—limited upside. At this point, a bank comes to you and says:
“If you believe fabric prices will rise, I can lend you money so you can buy 1000U worth of fabric. That means, you only put in 100U, and I’ll lend you another 900U, so you can buy 100 rolls at once. When you sell, just repay me the loan.”
What would you do? Of course, sign the deal. Two possible outcomes:
1. Fabric prices rise
After a few days, fabric prices rise 10%.
Xiao Li, with 10 rolls, earns only 10 taels.
But with leverage, holding 100 rolls, he earns 100 taels! His principal doubles.
This is the charm of leverage.
2. Fabric prices fall
But if prices fall 10%, the situation is dangerous.
Xiao Li with 10 rolls loses only 10 taels.
But leveraged at 100 rolls, he loses 100 taels, wiping out his principal.
The bank won’t lose money—they will forcibly reclaim the goods, leaving you with no chance to recover.
Let’s Return to Perpetual Contracts—Explaining Leverage with the Above Story
Imagine walking into the “SuperEx Contract Market,” where there’s a “margin table”:
You: bring 100 USDT as margin.
Rules: you can magnify this 100 USDT up to 150x position. You choose 10x, controlling a contract worth 1000 USDT.
Nature of contracts: not buying real coins, but betting on price movement. Profit/loss is calculated on nominal value and directly added/subtracted from your margin.
Step 1: Opening a Position
Underlying: BTC perpetual contract (USDT-margined)
Entry price: $100,000 (hypothetical for easy calculation)
Leverage: 10x
Margin: $100
Nominal position = 100 × 10 = $1,000 (equals 0.01 BTC contract size)
Note: You did not “borrow BTC.” You simply created a contract position: if price rises, you profit; if it falls, you lose. All gains/losses are borne by your 100 USDT margin.
Step 2: Small Price Movements, How Is PnL Amplified?
If BTC rises 1% (to $101,000):
Position value rises $1,000 × 1% = $10
Your floating profit = +$10 → margin becomes $110
Equivalent to +10% return on margin (because of 10x leverage)
If BTC falls 1%:
Floating loss −$10 → margin becomes $90
Margin drawdown −10%
Conclusion: every 1% move in price equals about ±10% change in your margin (≈ leverage multiple).
Step 3: Liquidation Line (Why 10x Isn’t Simply “10% Drop = Liquidation”)
Liquidation occurs when losses approach usable margin, but several costs are deducted first:
Maintenance margin: minimum safety buffer (commonly 0.5%–1% of nominal value).
Fees: taker/maker fees for open/close.
Funding fee: periodic settlement every 8h between longs and shorts.
Slippage: transaction executed worse than expected.
Example estimate (illustrative only, platform rules apply):
Initial margin: $100
Maintenance margin (0.5% × $1,000) ≈ $5
Estimated fees (taker 0.05% × $1,000 × 2) ≈ $1
Reserve for slippage/funding ≈ $4
Net loss buffer ≈ $100 − $5 − $1 − $4 = $90
Equivalent price drop ≈ $90 / $1,000 = ~9%
Summary: At 10x leverage, a ~9% adverse move may trigger liquidation (not a full 10%, due to costs and margin buffer).
Step 4: How Does Shorting Make Money?
With 10x leverage, $100 margin, $1,000 position:
If BTC falls 1% → you earn $10 → margin +10%
If BTC rises 1% → you lose $10 → margin −10%
Shorting is not “borrowing BTC to sell,” but opening a derivative contract where price decline = profit. Settlement is the same.
Key Roles & Fund Flows
Exchange: not lending you money, but matching longs/shorts and monitoring your margin. If losses near danger, system liquidates your position to prevent negative balance.
Counterparty/Market makers: provide opposite liquidity. Your profit = their loss (or vice versa). Exchange takes fees.
Insurance Fund / Auto-Deleveraging (ADL): in extreme cases, insurance fund covers; in rarer cases, ADL reduces winning positions to offset bad debt.
Beginner’s Guide: Using Contract Leverage Correctly
1. Three Golden Rules for Beginners
The biggest mistake beginners make: going all-in + high leverage. Tuition is paid within half an hour. Remember three survival rules:
① Low leverage:
Like learning to drive—you don’t start on the highway. Begin with 2–3x leverage for higher tolerance to mistakes.
② Small capital practice:
Start with under 100U, treat it as tuition. First step isn’t making money—it’s learning not to lose big.
Example: If you’re learning to cook, you wouldn’t start with a 100U lobster. Better to practice on a 1U potato—burnt or not, the lesson is the same but cheaper.
③ Strict stop-loss:
Stop-loss = your airbag. E.g., close at −10%. Losing a “piece of flesh” is better than losing a “limb.” Many fail because they refuse to cut loss, watching −10% become −90% and then liquidation.
2. Margin Mechanism: It’s Not Just Money, but a Psychological Game
Margin trading is essentially a game of chips on the table.
Isolated Margin: each position independent. One blown position doesn’t affect others.
Cross Margin: all funds share margin. Feels safer, but one extreme move may wipe out everything.
Example:
Isolated = separate accounts: you buy 1000 yuan worth of watermelons. If unsold, only that 1000 is lost; your apples and oranges are fine.
Cross = one big account: put all 5000 together. If watermelons crash, the entire pool is gone, apples and oranges included.
For beginners, isolated margin is safer.
3. How to View Liquidation Price?
Most stare at “how much I can earn,” but ignore “where liquidation hits.” Like driving while only looking at the gas pedal, not the brakes.
Logic:
Long position → if price falls too far → liquidation.
Short position → if price rises too far → liquidation.
Example: You borrow to buy 5000 worth of goods with 1000 margin + 4000 loan. If market drops to 4000, your margin is gone, the lender liquidates your goods to recover their 4000. That’s liquidation.
Rule of thumb: Always ask—can I bear liquidation if it happens?
Three Core Risk Management Strategies
① Stop-loss:
Exit at −10%, don’t hope for reversal.
Market opportunities always exist. Preserve capital.
② Take-profit:
Cash out 20–30% gains in parts.
Don’t wait for reversal. Many lose profits by being greedy.
③ Position sizing:
Never all-in.
Use only 10–20% per trade.
This leaves room for recovery if wrong.
Contract Leverage Glossary (Super Practical)
1. Basic Concepts
Leverage: tool to magnify trades by borrowing → amplifies both gains and losses.
Margin: your principal stake. Example: 100U margin to open 1000U at 10x.
Isolated Margin: margin independent per position—recommended for beginners.
Cross Margin: shared margin across positions—risky if market turns sharply.
Long (Open Long): buying in expectation of rising prices.
Short (Open Short): selling in expectation of falling prices.
Liquidation: forced closure when margin insufficient—loss of entire margin.
Closing a position: voluntarily exiting—either for profit or loss.
2. Price Terms
Entry price: price at which you opened.
Exit price: price at which you closed.
Liquidation price: level where liquidation occurs—shown by exchanges.
Mark price: reference price for PnL and liquidation, prevents manipulation.
Spot price: actual market price—slightly different from contract price.
3. PnL Terms
Unrealized PnL: floating profit/loss before closing.
Realized PnL: actual profit/loss after closing.
Funding rate: periodic fee exchange between longs and shorts to align contract with spot.
4. Order Types
Limit order: set price, executes only when market hits.
Market order: executes instantly at market price—fast but slippage risk.
Stop-loss order: auto-close at pre-set loss level.
Take-profit order: auto-close at target profit level.
5. Risk Control Terms
Forced liquidation: system closes your position when liquidation hits.
Maintenance margin rate: ratio to determine liquidation.
Position size: quantity of contracts held.
Leverage multiple: 2x, 5x, 10x, 20x… SuperEx supports up to 150x.
6. Market Sentiment
Bulls: those betting on price rising.
Bears: those betting on price falling.
Wick: sudden spike/dip on a candlestick, often causing quick liquidations.
Double liquidation: rapid pump then dump, liquidating both longs and shorts.
7. Trading Strategies
Light position: small capital, lower pressure—used by pros.
Heavy position: large capital, high risk, fragile mindset.
Trend trading: follow market direction.
Counter-trend trading: catching tops/bottoms—extremely risky for beginners.
8. Common Slang
All-in: putting all funds into one trade.
Averaging down: adding margin to a losing trade—can save or kill.
Stop-loss hunting: big players deliberately trigger retail stop-losses.
Flash crash spike: sudden long wick down then back up—wiping both sides.
Final Thoughts: Contract Leverage—Friend or Foe?
Contract leverage is essentially a knife. The knife itself is not wrong—what matters is who holds it:
If you know the rules and control it, it’s a sharp tool, doubling efficiency.
If you’re greedy and impulsive, it’s a deadly weapon that can wipe you out.
Trading is not a sprint but a marathon. The winners are not the bravest, but those who best understand risk management.
✨ One-sentence summary: Contract leverage is not a monster, but you must use it with awe and caution. Don’t dream of overnight riches—learn to build steadily, and only then can you laugh at the end.
