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The "Leverage Trap" in futures.
You should understand how leverage works in futures contracts to avoid unnecessary losses.
Indeed, high leverage can bring quick profits, making investors like us very "happy" and often abusing high leverage in future trading.
In this article, I will define leverage > 10x as high leverage. The question arises: if I use high leverage when the market declines, how much % must it drop to lose all my capital?
Leverage 10x: 10%
Leverage 20x: 5%
Leverage 30x: 3.33%
Leverage 40x: 2.5%
Leverage 50x: 2%
Leverage 60x: 1.67%
Leverage 100x: 1%
Leverage 125x: 0.8%
As you can see, when trading with 125x leverage, the market only needs to drop 0.8% for you to lose all your capital. The cryptocurrency market is always highly volatile; in just a blink of an eye, you can make a lot of money, but it can also wipe out your account.
So don't abuse high leverage; otherwise, you will have to start over, and you may not even have a chance to do so.
You should understand how leverage works in futures contracts to avoid unnecessary losses.
Indeed, high leverage can bring quick profits, making investors like us very "happy" and often abusing high leverage in future trading.
In this article, I will define leverage > 10x as high leverage. The question arises: if I use high leverage when the market declines, how much % must it drop to lose all my capital?
Leverage 10x: 10%
Leverage 20x: 5%
Leverage 30x: 3.33%
Leverage 40x: 2.5%
Leverage 50x: 2%
Leverage 60x: 1.67%
Leverage 100x: 1%
Leverage 125x: 0.8%
As you can see, when trading with 125x leverage, the market only needs to drop 0.8% for you to lose all your capital. The cryptocurrency market is always highly volatile; in just a blink of an eye, you can make a lot of money, but it can also wipe out your account.
So don't abuse high leverage; otherwise, you will have to start over, and you may not even have a chance to do so.
Disclaimer: Includes third-party opinions. No financial advice. May include sponsored content. See T&Cs.
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