**Leverage in Trading: How to Multiply Your Profits (and Risks)**
Leverage is a powerful financial tool that allows traders to control larger positions with a smaller amount of capital, amplifying both potential profits and risks. In your example with **BTCUSDT at 2x leverage**, this means you can trade a $100,000 position with just $50,000 of your own funds.
### **How Does Leverage Work?**
With **2x leverage**:
- If Bitcoin’s price increases by **5%**, your profit becomes **10%** (5% × 2).
- However, if the price drops by **5%**, your loss also doubles to **10%**.
### **Practical Example**
Assume you buy **BTC worth $10,000 with 2x leverage**:
- **If BTC rises from $50,000 to $52,500 (+5%)**:
- Your profit = **$1,000** (instead of $500 without leverage).
- **If BTC drops to $47,500 (-5%)**:
- Your loss = **$1,000** (instead of $500).
### **Key Rules for Safe Leverage Trading**
✅ **Start low** (2x-5x max for beginners).
✅ **Always use Stop-Loss orders** to limit losses.
✅ **Risk only 1-5% of capital per trade**.
✅ **Avoid high leverage in volatile markets**.
⚠️ **Warning:** Leverage is a double-edged sword—it can rapidly increase gains but also lead to losses exceeding your initial investment. Smart traders balance aggression with strict risk management.
