"What is Leverage"
In the world of cryptocurrencies, leverage refers to the ability to trade with more money than you actually have, borrowing funds from the exchange to increase your position. It is a common tool in cryptocurrency trading, especially on platforms like Binance, Bybit, or Bitget.
How does it work?
Suppose you have $100 and use a leverage of 10x. This means you can open a trade as if you had $1,000. The exchange lends you the remaining $900.
If the market moves in your favor, the profits are multiplied by 10.
But if the market moves against you, the losses are also multiplied, and you could lose your entire initial investment very quickly (this is called liquidation).
Simple example:
Capital: $100
Leverage: 10x
Total trade: $1,000 in BTC
If BTC rises by 1%, you earn $10 (which is 10% of your capital).
But if BTC falls by 1%, you lose that $10 and if the fall continues, you could be liquidated and lose the $100.
Risks of leverage in crypto:
High volatility: cryptocurrencies change price very quickly, which can lead to frequent liquidations.
Rapid losses: you can lose your initial investment in minutes if the market goes against you.
Requires experience: it is not recommended for beginners.
#BinanceSquareTalks #BinanceSquare
