What exactly is leverage that everyone often talks about?

Leverage, in simple terms, is to use a small amount of principal to leverage a large amount of investment. For example, if you only have 10,000 yuan, and the broker lends you 90,000 yuan, then you can use 100,000 yuan to invest in stocks or Bitcoin, which is 10 times leverage. Of course, the broker is not doing charity, and you have to pay back the money you borrow, and there are also conditions.

The advantage is that if the investment rises, the profit is considerable. But the risk is also magnified. In case of investment losses, not only may the principal be lost, but also the money borrowed by the broker will be paid, otherwise it will be forced to close the position, and you will lose everything and may even owe money.

Some people use high leverage to make a lot of money in a short period of time, but more people are liquidated due to market fluctuations, suffer heavy losses, and even become heavily in debt. The broker will not wait for you to get your money back. Once the warning line is reached, the position will be closed immediately to stop the loss.

Therefore, leverage is a double-edged sword. It satisfies the dream of getting rich quickly, but also magnifies the cost of failure. Behind it is a test of the endless pursuit of human greed. Being cautious and doing what you can is the long-term way to invest.

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