Leverage, this double-edged sword of the financial market, can instantly illuminate wealth dreams but can also consume all your accumulations in an instant. It is by no means a shortcut to financial freedom; rather, it is a harsh test of the trader's character and discipline.
I still remember the first time I encountered 20 times leverage; it felt like holding the universal key to wealth. The account numbers did indeed double in a dizzying way, but soon after, came a rapid collapse to zero within two days—a lesson etched in my memory, with a heavy price.
What is the essence of leverage? It gives you the trading power beyond your own capital. Invest $100, and with 10 times leverage, you are moving a $1000 trade. This power seems grand, yet harbors danger. It amplifies not only potential gains but also every small judgment error.
Why do countless traders fail under leverage? The root often lies in the human heart.
High leverage is often misinterpreted as a guarantee of high returns. In reality, it often amplifies mistakes first, rapidly turning what could have been a small loss into a catastrophic disaster.
A lack of ironclad stop-loss discipline and clear entry logic makes leverage like installing rocket engines on an out-of-control train, only speeding up the path to disaster for poor trades.
The high pressure from massive floating profits and losses easily triggers panic, greedy FOMO, and retaliatory actions after losing, which are precisely the nemeses of rational trading.
So, how do you harness this sharp tool in reverence, rather than being backfired by it?
Experienced traders know that low leverage, like 2-3 times, is the way to go for the long term. True wealth accumulation relies on stable compound interest, not on reckless 50 times bets. Restraint is the beginning of wisdom.
This is the key point of leveraged trading! No matter how tempting the leverage multiplier is, you must adhere to the iron rule: the risk exposure of a single trade must never exceed 1%-2% of the total account amount. This is the moat that protects your trading life.
Before pulling the trigger to enter, you must clearly set your stop-loss line. It is not a symbol of your weakness but a guarantee of survival.
The power of leverage should only be used for those truly worth betting on, where a clear trend has emerged, key resistance/support levels have been effectively broken, and multiple signals form a strong resonance. Be patient and strike with precision.
Leverage itself has no good or evil; it is cold and neutral. It is like a wild horse, only a rider who deeply understands its nature, holds it in awe, and uses ironclad discipline as the reins can ride it to gallop. Remember, using leverage is to amplify your verified trading skills, not to indulge the surging waves of inner emotions. The safety of your account depends on this clarity and restraint.
The market changes every day; you must seize the right moment to act. If you are still too confused, you can click on my profile to follow me. I usually share some cutting-edge information and practical strategies to seize great opportunities together.
