Leverage Trading: The Illusion of Overnight Wealth and the Risk of Losing Everything
Leverage trading is like a double-edged sword. Behind the leverage ratios of 10x to 125x lies the question: is it an opportunity for overnight wealth or a trap that leads to bankruptcy?
The 'Magic' of Leverage: The Amplification Effect of Capital
- 10x Leverage: If you have 100 yuan in capital, using 10x leverage allows you to operate on 1000 yuan of assets, instantly amplifying your capital size by 10 times, as if your worth has 'doubled'.
- 75x Leverage: With the same 100 yuan in capital, 75x leverage increases your available funds to 7500 yuan, seemingly providing a larger operational space as if a 'pie fell from the sky'.
- 125x Leverage: 100 yuan in capital can turn into 12500 yuan under 125x leverage, creating a sense of capital inflation that may even lead to the illusion of 'going to the sky'.
Hidden Risks of High Leverage
- Extremely High Liquidation Risk: Under 10x leverage, a 10% drop in asset price triggers liquidation; with 75x leverage, a mere 1.33% drop could wipe out your capital; and with 125x leverage, even a 0.8% adverse fluctuation can cause your investment to 'go down the drain'.
- Increased Psychological Pressure: High leverage amplifies the impact of price fluctuations, where even minor rises and falls might accelerate your heartbeat and lead to sleepless nights, affecting your judgment.
- High Trading Costs: Large position operations mean higher transaction fees and financing costs, especially when holding overnight positions, where costs can consume your capital like flowing water.
Rational Operation Suggestions
- Newcomers Should Be Cautious with High Leverage: If you are a trading novice or have a lower risk tolerance, it is advisable to start with 10x leverage or lower, gradually accumulating experience.
- Make Good Use of Stop-Loss Tools: Do not passively wait for losses to expand; setting stop-loss orders can automatically close unfavorable trades, effectively limiting losses, which is a wise move to protect your capital.