Futures for Beginners: Controlled Leverage on Binance
Hello, I am Athena. Did you know that the attractive aspect is the use of leverage, which allows you to multiply your gains but also your losses? Here I explain how to get started responsibly.
1. What is Leverage? (Example of 5x)
Leverage allows you to control a larger position than you actually have in your account. For example, if you have $100 and use 5x leverage, you can open a position of $500.
Practical Example:
You buy 1 BTC at $20,000 with 5x leverage.
If the price of BTC rises by 5% to $21,000, you would have gained $100 (5% of $500), which is double what you would have earned without leverage.
But, if the price falls by 5% to $19,000, you would have lost $100, which is double what you would have lost without leverage.
Leverage amplifies both gains and losses, so it is crucial to use it with caution.
2. Use Stop-Loss to Control Losses (Example of Stop-Loss at 3%)
A stop-loss is an automatic order that closes your position to avoid further losses if the market moves against you.
Practical Example:
You buy 1 BTC at $20,000 with a 3% stop-loss.
If the price falls to $19,400, the stop-loss will automatically close your position to prevent further losses.
This means that if the market goes against you, you would only lose $600, which is controlled risk management.
3. Diversification: Don’t Put Everything into One Trade
To protect your portfolio, do not put all your capital into a single trade, even if it is in futures. Diversifying helps you reduce risk.
Practical Example:
Suppose you have $1,000 to trade.
$400 in futures of $BTC with 2x leverage.
$300 in futures of $ETH with 3x leverage.
$300 in futures of $BNB with 5x leverage.
If one of your assets falls, the others might rise, helping you balance the losses.