Is leverage really as dangerous as we are told?

The answer is a resounding NO, but to understand the answer, it is important to identify the type of leverage that we are choosing to have... Well, it is not the same to have a 100 USD account and go to 100x with 1% of said account , which leverage 100x 100% of the account.

In the first case, 100% movement against me is required to be fully liquidated without considering an SL before and in the second case, only 1% movement is required against me to be completely liquidated without considering an SL before.

I still see people who believe that if I use 100X leverage on BTC I will lose all my money and that is because they ignore the power of leverage and the virtues of the mathematics behind their position, in the maximum risk of their possible admitted loss and the transaction volume.

Read the following cases of operations with 100USD accounts, both on cross margin, without Stop Loss 😱 and draw your own conclusions.

-Mike, use 2 dollars from your account leveraged at 100x and the price goes against you by 3%.

-Alice, use your $100 account but leveraged at 2x and the price also goes against you by 3%.

1. Who loses more?

2. Who will lose everything first?

3. What percentage against does each require to be completely liquidated if they are in cross margin?

If you don't know how to answer these three questions, not only should you not be using leverage, but you should not be doing futures.

Thinking that by using a large leverage they will liquidate you quickly or that if you do it with cross margin even more so you will be liquidated and lose all your money, not only says that you ignore the power of leverage and what it was created for, but also that that you still need to learn a lot about risk and volume management.

Now, if you know the answer to the questions and understand the concept of position risk management. You know well that leverage is not the enemy. Don't be fooled, DYOJ

AMTrading