What is leverage in trading?

Leverage is a tool that allows you to trade with more money than you actually have, using borrowed funds from the platform.

This can increase your potential profits, but also your losses. Therefore, leverage is considered a higher risk strategy and is not recommended for beginners. 🚀

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How does it work?

When you use leverage, you choose a multiple that amplifies your trades, such as 2x, 5x, or even 10x. For example: If you have 100 USDT and use 10x leverage, you can open a position of 1,000 USDT. If the price of the asset rises by 5%, your profit would be 10 times greater, meaning 50 USDT instead of 5 USDT. However, if the price drops by 5%, your loss would also be 50 USDT, which could wipe out your entire initial capital.

Why is leverage useful?

Greater purchasing power: It allows you to take advantage of market movements that would otherwise be insignificant. Flexibility: You can open large positions with little capital.

But be careful of the risks:

If the market moves against you beyond your margin, the platform will automatically close your position (liquidation), and you will lose the capital you put up as collateral. Leverage is not for everyone and requires a solid strategy and knowledge of the market.

Imagine you only have 10 tickets to spend at the fair. 🎡 With leverage, someone lends you 90 more tickets so you can play as if you had 100.

If you win a prize, it will be huge because you played big. But if you lose, you will not only lose your 10 tickets, but you will also have to return the 90 borrowed tickets. This could leave you with nothing! 🎟️💸

It is a magnifying glass that amplifies results, both positive and negative. That is why leverage should be used with caution and only when you fully understand the risks. 🧠🔍

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