The Truth About Trading Leverage: Why Your Account Balance Isn't Your Real Buying Power

New to crypto trading? Here’s something that might shock you: the money you can actually trade with often exceeds your deposit. Welcome to the world of buying power—and the risks that come with it.

Why Your $10K Deposit Suddenly Becomes $20K

When you deposit cash into a trading account, your buying power isn’t just limited to that amount. On margin-enabled platforms, exchanges allow you to borrow funds to amplify your positions. This borrowed capital is where buying power comes in.

Think of it like this: if you deposit $10,000 and your exchange offers margin trading with certain terms, your actual buying power could be $20,000, $50,000, or even more depending on the platform’s leverage settings. The difference? That extra money is a loan from the exchange.

This is why buying power figures vary dramatically across different crypto exchanges. Each platform sets its own borrowing limits, interest rates, and margin requirements. What gives you 5x leverage on one exchange might only grant 2x on another.

Margin vs. Non-Margin: The Critical Difference

Non-margin accounts: Simple math. Your buying power equals your cash balance. What you deposit is what you get.

Margin accounts: Here’s where it gets complex. You’re now taking out loans to trade. The exchange requires two safety nets:

• Initial margin: The minimum cash you need in your account to borrow funds (typically 50% of the loan value)
• Maintenance margin: The minimum balance you must maintain to keep positions open (typically 35% or higher)

Let’s run the numbers: Suppose you have $50,000 in your account and want to take a margin loan at a 50% initial margin requirement. You can now access $100,000 in buying power—essentially doubling your capital.

But here’s the catch: your account value cannot drop below the maintenance threshold. With a 35% maintenance margin requirement:

Liquidation threshold = $50,000 loan ÷ (1 - 35%) = $76,923.07

If your portfolio value falls to $76,923, the exchange issues a margin call. You either deposit more cash or sell positions immediately. Fail to act within days, and the exchange liquidates everything.

Day Traders Face Stricter Buying Power Rules

Short-term traders (those opening and closing 4+ trades every 5 business days) access special margin privileges—but with harder requirements.

These day traders typically need:

• Minimum $25,000 maintenance margin
• Trading volume equal to at least 6% of their margin account
• Stricter buying power calculations than swing traders

The upside? Day traders can access more leverage. The downside? One bad move and that $25,000 minimum triggers immediate liquidation risk.

Leverage in Crypto: The Double-Edged Sword

Crypto exchanges take leverage to extremes. Some platforms offer up to 20x leverage on perpetual contracts—meaning $1,000 becomes $20,000 in buying power instantly.

Here’s the reality check: 20x leverage is 20x the profit potential AND 20x the loss potential. Your $1,000 doesn’t just disappear—it evaporates in minutes when the market moves against you. Instead of a margin call, many crypto exchanges trigger automatic liquidation without warning.

The Buying Power Trap: Why It Feels Safer Than It Is

Beginners often feel emboldened by buying power. “I have $100K to trade with!” they think. Then they forget:

• Borrowed money must be repaid (with interest)
• Markets move faster than your reflexes
• Liquidation price = Game over
• Maintenance margins exist for a reason—exchanges designed them to protect themselves first, you second

Your actual buying power isn’t free money. It’s calculated risk with an expiration date.

What You Need to Know Before Trading on Margin

Every exchange calculates buying power differently. Before placing your first margin trade:

• Review the exchange’s specific margin requirements and lending terms
• Understand the maintenance margin percentage on your chosen pairs
• Know your liquidation price before entering any position
• Test your strategy on smaller positions first
• Never assume buying power will feel the same on different platforms

Buying power is a tool, not a gift. Use it wisely, or it will use you.