A simple question in the contract:
Option 1: 100U margin 10x leverage position 1000U;
Option 2: 50U margin 20x leverage position 1000U;
Is there a difference between the two?
If looking at the profit of a single cryptocurrency, there is no difference between the two; but if it's a loss situation, let's compare:
Option 1: 10x leverage: If the market price fluctuates by 1%, your profit and loss will be the position's 1% × 10 = ±10U (which is 10% of the 100U margin).
Option 2: 20x leverage: If the market price fluctuates by 1%, your profit and loss will also be the position's 1% × 20 = ±20U (which is 40% of the 50U margin).
Now let's look at the liquidation distance:
Option 1: 10x leverage: A price reversal of 10% (100U ÷ 1000U) will lead to a total loss of the margin;
Option 2: 20x leverage: A price reversal of only 5% (50U ÷ 1000U) will lead to a total loss of the margin.
If that's the case, why not just open a position using option 1? But what if you only have 1000U and want to open multiple positions?
Option 1: Single position 100U, with 1000U you can theoretically open up to 10 cryptocurrency positions.
Option 2: Single position 50U, with 1000U you can theoretically open up to 20 cryptocurrency positions.
Summary: Option 1 has stronger risk resistance than option 2, but if capital is limited and you have strong market insight and want to trade as many cryptocurrencies as possible, then option 2 is more suitable!
