📘 A Simplified Explanation of Leverage for Beginners with an Example on XRP

Leverage allows you to enter trades larger than your actual balance. But you must know that profits and losses are both magnified.

🔹 A Practical Example on XRP:

Let's assume you only have $100.

The current price of XRP is $2.80.

Using 10x leverage, you can enter a trade with a size of $1000 (which is approximately 357 XRP coins).

👉 Scenario One (Profit):

If the price of XRP rises from 2.80$ to 2.90$ (+0.10$ only), your profit would be:

357 × 0.10 = $35.7.

This equals +35% of your original capital ($100) due to leverage.

👉 Scenario Two (Loss):

If the price of XRP drops from 2.80$ to 2.70$ (-0.10$ only), your loss would be:

357 × 0.10 = $35.7.

This means you lost more than a third of your original balance very quickly. And as the price continues to drop, your account may be liquidated.

⚠️ Summary:

Leverage is a double-edged sword: it can multiply your profits, but it can also wipe out your account in moments. Therefore, I advise beginners to stick to spot trading as it is safer.

❓ My question to you: If you had a choice, would you prefer to take the risk with leverage or would you prefer the safety of spot trading?

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