Leverage is a tool in trading that allows you to control a larger position with a smaller amount of money. For example, with 10x leverage, a $100 balance can open a $1,000 trade. Sounds powerful, right? But this power comes with serious risk.
When the market moves in your favor, leverage can multiply your profits. A 2% gain on a 10x leveraged trade becomes 20%. However, the same rule applies to losses. A small 2% drop could wipe out your entire position. This is why leverage is often compared to a double-edged sword.
Why Most Beginners Should Avoid Leverage:
• High Risk of Liquidation: Even small market moves can close your position and result in losing your capital.
• Emotional Stress: Watching trades swing rapidly creates pressure, leading to fear, greed, and bad decisions.
• Focus on Gambling, Not Learning: Instead of developing solid trading skills, beginners often chase quick profits with leverage.
• False Confidence: A few lucky wins on high leverage can make you overconfident, but eventually the market humbles everyone.
Safer Approach for New Traders:
• Start with spot trading instead of futures.
• Use small amounts and learn how the market behaves.
• Focus on strategies like support/resistance, trend following, and risk management.
• If you must use leverage, keep it very low (2x–3x) and never risk your whole balance.
Pro Tip: In trading, survival is the key. If you protect your capital and trade wisely, opportunities will always come. Don’t let leverage end your journey before it even begins.
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