The Secret and Risk of Leveraged Trading!
In the vast world of investment, we often hear the word "leverage". In short, leverage is to use small amounts of funds to leverage larger transactions. Suppose you only have 10,000 yuan of capital and want to enter the stock market or Bitcoin market, but the funds seem to be stretched. At this time, some brokers will provide you with leverage services, such as lending you 90,000 yuan, so that you can trade with a total of 100,000 yuan. This is a 10x leveraged transaction.
Why are brokers willing to provide leverage?
Many people may be curious about why brokers are willing to take risks to provide such a large amount of loans. In fact, this is not because brokers are philanthropists, but because they can charge a certain fee or profit share from the transaction by providing leverage services.
The charm and risks of leveraged trading
The charm of leveraged trading lies in its ability to amplify the profit effect. If you use a principal of 10,000 yuan, with the help of leverage, you can theoretically earn tens or even hundreds of times more than the principal. However, at the same time, leveraged trading also brings huge risks. Because once the market moves in the opposite direction of your expectations, your losses will also be magnified.
Real Case: Get Rich Overnight or Become Poor Overnight?
Some people have used high leverage to make huge profits in just a few days, but this is only the experience of a few lucky people. More people may suffer huge losses due to market fluctuations, or even go bankrupt overnight. This is the double-edged sword effect of leveraged trading: on the one hand, it can bring amazing returns, and on the other hand, it also hides huge risks.
Margin Call and Forced Liquidation
In leveraged trading, once your account funds fall below a certain threshold set by the broker (such as your principal), the broker will ask you to add margin to maintain your position. If you fail to add margin in time, the broker has the right to force liquidation, that is, sell your stocks or Bitcoin to make up for the loss. In this way, your losses will be borne by yourself, and the broker will recover the loaned funds.
Therefore, when participating in leveraged trading, investors need to fully understand its risks and have sufficient risk tolerance and fund management capabilities.At the same time, you also need to choose a broker with good reputation and high-quality service to cooperate with. Only in this way can you enjoy the benefits brought by leveraged trading while avoiding potential risks to the maximum extent.
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