Leverage ⚙️: A multiplying power (and also a risk!) in trading
Leverage is a great tool provided by trading platforms like Binance, allowing you to trade with a much larger amount than your actual capital 💰.
Simply put:
If you have $100 💵, and you used leverage \times10, that means you can open a trade as if you have $1000 🚀!
How does leverage work?
Real-life example:
* Your capital: $100
* Leverage: \times10
* The size of the trade you can open: $1000
Profit and loss: both sides
* If the price increases by just 1% 📈, you earn 10% of your original capital (which means $10 in our example).
* But, if the price decreases by just 1% 📉, you will also lose 10% of your capital (which means $10 in our example).
Margin
The margin is the actual amount you own and are risking in the trade. If your loss reaches the value of this margin, the platform automatically closes your trade to protect itself from a larger loss ❌.
Its risk: Be careful!
Leverage multiplies profits, which is a great advantage, but at the same time, it multiplies losses ⚠️. You could lose all your capital quickly if you don't have a clear risk management plan.
Important tips before using leverage:
* Don't use high leverage if you're still a beginner in trading 🧠.
* Always set a stop loss to protect yourself from significant losses ⛔.
* Trade only with amounts you can afford to lose and don't worry about them ☝️.
* Try on a demo account first to learn and understand everything without any risk 🧪.
In summary:
Leverage is a double-edged sword ⚔️. Use it carefully and wisely, and understand well the risks you may face.
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