EasyA Co-founder Explains to XRP Holders How Leverage Works

Dominic Kwok, co-founder of the educational platform EasyA , recently provided an in-depth explanation of how leverage functions in cryptocurrency trading, offering clarity on a topic often misunderstood by new ￰1￱ detailed breakdown outlined the core concept of leverage, how it amplifies both gains and losses, and why it is widely regarded as one of the riskiest trading tools in financial markets. Leverage, as Kwok described , allows traders to borrow funds from an exchange to take on a larger position than their actual capital would otherwise ￰2￱ instance, an investor with $100 can use leverage to control a $1,000 position at a 10x ￰3￱ means that the trader contributes $100 as collateral and borrows $900 from the ￰4￱ the approach can significantly increase potential profits if the market moves in the trader’s favor, it equally magnifies losses if prices ￰5￱ many have asked, here's how leverage works: TLDR leverage is when investors borrow money to trade, allowing them to take out larger positions than otherwise possible.

here's how (and why it's so risky): let's say i have $100, but i want to buy more crypto than my $100… ￰0￱ — Dom | EasyA (@dom_kwok) October 13, 2025 How Leverage Amplifies Gains and Losses In his explanation, Kwok used a straightforward example to illustrate both sides of the ￰6￱ a trader uses 10x leverage on a $100 investment, they are effectively controlling $1,000 worth of crypto ￰7￱ the market moves upward by 10%, the position’s value increases to $1,100. After repaying the borrowed $900, the trader pockets $200, effectively doubling their original capital. However, the same mechanism that allows for such high returns can quickly erase the trader’s ￰8￱ the market drops by 10%, the $1,000 position falls to $900, equaling the borrowed ￰9￱ that point, the exchange automatically closes the position to recover its funds, leaving the trader with a total loss of their $100 ￰10￱ automatic liquidation is a safeguard for exchanges to prevent borrowers from losing more than their own ￰11￱ are on X, follow us to connect with us :- @TimesTabloid1 — TimesTabloid (@TimesTabloid1) June 15, 2025 Clarification on Losses and Liquidation Following Kwok’s initial breakdown, another X user known as Legendary Hamster posed a question to clarify ￰12￱ asked whether a trader would owe money to the exchange if the price of the asset continued to drop more than 10%, such as in a 20% decline ￰13￱ clarified that exchanges typically close out leveraged positions automatically before further losses ￰14￱ soon as the asset’s value decreases enough to eliminate the trader’s margin, the position is liquidated ￰15￱ process ensures that traders do not go into debt and that exchanges recover the borrowed funds in ￰16￱ emphasized that this mechanism is precisely what makes leverage so risky, as even a small market movement in the wrong direction can wipe out an investor’s entire position almost ￰17￱ and Investor Caution Kwok’s explanation emphasizes a key principle in financial trading: leverage should only be used by those who fully understand its ￰18￱ it offers the potential for significant returns, it is a double-edged tool that can easily lead to complete capital loss when the market turns ￰19￱ pointed out that many traders underestimate how quickly leveraged positions can unravel in volatile markets, such as ￰20￱ digital assets often experience sharp and unpredictable price movements, the risk of liquidation remains high even over short ￰21￱ : This content is meant to inform and should not be considered financial ￰22￱ views expressed in this article may include the author’s personal opinions and do not represent Times Tabloid’s ￰23￱ are advised to conduct thorough research before making any investment ￰24￱ action taken by the reader is strictly at their own ￰25￱ Tabloid is not responsible for any financial ￰26￱ us on X , Facebook , Telegram , and Google News