''Spot Trading is for poor people, and Futures Trading is for rich people'' is one of the biggest jokes I've heard.
The reality is quite the opposite. Leverage, which is essentially a loan from your broker, is a tool for the wealthy to amplify their gains with minimal upfront capital.
For instance, let’s say I have $500 million to invest but decide to put only $5 million into the market, keeping the rest safe. I place a long position on Bitcoin when it’s at $70k, giving me around 14.29 BTC.
But by using 100x leverage, I control 1429 BTC. If the price goes up to $71k, I’d make over $1.429million in profit from just a $5 million investment—pretty impressive, right?However, if Bitcoin drops to $69.5k, I’d lose $500 per BTC, totaling over $715k in losses.
I'd still have around $4.285 million left, so not too much of a concern.
But if the price plummets to $63k, my losses would exceed $103 million. Most retail traders would get margin calls much earlier, leading their brokers to close out their positions, potentially wiping out all their funds.
For institutional or professional traders like myself, the broker might call, asking me to deposit another $98 million tocover the negative balance.
I could either deposit more or wait a month for the market to recover, as brokers often give professionals more time.So, is Futures Trading really for the rich or the poor? If someone with just $10k uses 100x leverage, they could easily lose everything on a margin call.
My advice? If you don’t have much capital, stick to spot trading. Using leverage the way many do is pure gambling—either you win big, or you lose it all."