TL;DR
Leverage lets you trade with more capital than you actually have by borrowing funds, amplifying both potential gains and losses — a 10x leveraged position moves 10x faster than the underlying asset.
With 10x leverage, you deposit $100 as collateral (margin) and control a $1,000 position. If the asset rises 5%, your $1,000 position gains $50 — a 50% return on your $100 collateral. But if the asset drops 5%, you lose $50 — 50% of your collateral. At 10% drop, your entire $100 is gone. The higher the leverage, the smaller the price move needed to wipe out your position.
Jupiter Perps, Drift Protocol, and Flash Trade offer leveraged trading on Solana. You can also get leverage through DeFi loops: deposit SOL on Kamino, borrow USDC, buy more SOL, deposit again. This creates effective leverage on your SOL position. Leverage is also available through leveraged liquid staking products that amplify staking yields.
Liquidation is the primary risk — if your position loses enough value, the protocol force-closes it to protect lenders, and you lose your collateral. High leverage means tiny price moves trigger liquidation. Funding rates on perps add ongoing costs. And on-chain liquidations are transparent, meaning sophisticated traders can see liquidation levels and may intentionally push prices to trigger cascading liquidations.