Recently, I noticed that many people misunderstand how leverage works. When I opened a position with 100x leverage, my actual risk was less than the full position. Some people believe that a 100x leverage order means you are trading with 100 times your initial capital. This is incorrect and can easily mislead influencers promoting trades. These influencers can offer trades at any time, regardless of market direction, showing off impressive profits without explaining the risks involved. For example, I have seen influencers boast about high returns on a position under $10, but the actual profit was minimal.

Let’s take a $100 margin as an example. With 100x leverage, you have $10,000 worth of assets to control. You have $100, and the exchange has “lent” you $9,900. If you fully utilize this leverage, a market move of about 0.7% could liquidate your position, losing your $100 margin to the exchange. However, you don’t have to use all of your available funds. You can open positions worth $1 (1% of your margin), $10 (10% of your margin), $100 (equal to your margin), or even $1,000 (10 times your margin).

Many influencers who promote highly leveraged trading do so to impress with potential profits, often in the hundreds or thousands of percent. However, this strategy can easily fool newbies. For example, while BTC and ETH may have minimum position requirements, many altcoins allow positions as small as $1. With 100x leverage on these altcoins, you can spread your $1,000 margin across multiple small positions, reducing the risk of liquidation. This tactic allows influencers to frequently post seemingly impressive results without taking on significant risk.

It is important to understand leverage correctly to avoid being misled. High leverage can magnify both profits and losses, so it is vital to manage your risk and not be fooled by influencers’ claims of high returns. Always consider your true exposure and potential risk when trading with leverage.