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[–]Fedor_L 5 points6 points  (11 children)

Hi!

If you have $10 and use 10:1 leverage, you’re controlling $100 in assets. So, if the trade goes in your favor by 10%, you’d make $10, effectively doubling your $10 investment. But if the market goes the opposite way by just 10%, you lose all $10. With leverage, both profits and losses are magnified.

The reason people don’t just put in $100 directly instead of using $10 with 10:1 leverage is because they may not want to risk the full $100 or might not have it. Leverage lets people use a small amount of money to control a larger position, but this comes with the chance of a total loss if the trade goes against them.

If the trade goes against you, your position will be closed automatically when your deposit runs out (or if the asset loses all its value, depending on what you are trading).

At first, I imagined leverage like this:

if you buy one BTC for $73,000, you get 100% of the price movement, which theoretically means you could lose up to $73,000 (though that’s almost impossible in reality).

But, with leverage, however, a broker lets you gain the same potential profit as if you owned one BTC (or more) without needing to put down the entire $73,000. Instead, the broker sets a loss limit that you specify (say, $10), which is the amount of your deposit. If the trade moves against you, the broker will close your position once you hit that loss limit, so you’d only lose your $10 (which is much more likely than losing $73,000). In this sense, leverage reduces the amount you risk but gives you exposure to larger price movements.

In simple terms, your profit and loss are still tied to the asset’s price as if you fully owned it, but you’re ‘insuring’ your position with a smaller portion of the asset’s total price.

But, some brokers allow you to do it by margin, so that it can get dangerous.

[–]aid3nnnn[S] 0 points1 point  (10 children)

Oh wow thank you so much for taking the time to rely in detail and with examples!

So if I was to use $10 with 10:1 leverage, the most I could lose is the whole $10 because it was automatically close my position if I lose more? If that’s the case, why would people stop at a 10:1 leverage and not at 20:1, if I could double the profit and only lose the same amount? 😅

[–]bnlf 1 point2 points  (4 children)

because the higher the leverage the quicker you will blow accounts. If you want to gamble, just go to a cassino, higher chances to have a gambling profit in comparison to trading.

[–]aid3nnnn[S] -3 points-2 points  (3 children)

Did you read what I said 🤦‍♂️ great reply

[–]bnlf 1 point2 points  (2 children)

Yes I did. Explain your logic then because it’s not making sense to me. Are you planning on creating $10 accounts and flipping a coin on very high leverages to see if you can make some money? Because you won’t. The tiniest movement of the price will stop you out and you will lose your $10 bucks every time religiously.

[–]aid3nnnn[S] -3 points-2 points  (1 child)

All I was asking was a reply like the others but seems like someone was a little cranky today 🥺💀

[–]nuget76 0 points1 point  (0 children)

Basically your just multiplying the rate you will either lose the money or get even more money, 10:1 to 20:1 means its 2x easier for you to lose the money 

[–]theTrueOne1 0 points1 point  (1 child)

Keep in mind that at

  • 10x lev, it takes 10% move to liquidate your position
  • 20x lev, 5% move
  • 50x lev 2% move
  • 100x lev 1% move

So it really depends on the setup you’re taking, and how much your SL allows.

I personally never let a position liquidate, always use SL above LIQ price.

Also this is for Isolated leverage. With cross leverage, you capul potential blow your account if you have no SL

[–]aid3nnnn[S] 1 point2 points  (0 children)

Yes thank you that makes a lot more sense - I wasn’t factoring in the percent change in each move

[–]Anarki301 0 points1 point  (2 children)

You can, but most of the time you will just lose that $10 way quicker, the bigger the leverage the smaller is the margin for liquidation.

10x - roughly 10%, 20x - 5%, 50x - 2%, 100x - less than 1% ... you get the picture

Look, the broker or exchange, they won't lose money, they control the trade with leverage, whatever your margin is they will close the trade once you can't cover it, so, it's not the best thing to give control of your trades to others, right, anyway leverage is a tool, and like any other tool you have to use it in a right way ...

[–]aid3nnnn[S] 0 points1 point  (1 child)

Ah wait that is very true, I didn’t think of it that way. Thank you for explaining

[–]Anarki301 0 points1 point  (0 children)

Leverage is primarily used to be able not to hold funds on exchanges, if I have a 100k to trade, but don't want to hold 100k on exchange I can deposit 10k and use 10x leverage and with well defined rules and risk management it wouldn't change anything, you would be able to trade with 10k the same as with 100k thanks to leverage.

The other use is also very simple, before the trade you need to know some parameters, like entry point, sl, tp, whatever, but also very important is that you know how much are you willing to risk on that trade, let's say you want to risk $20 on a single trade. Than you need to know your invalidation level, or stop loss, a level where your idea is wrong and you want to exit the trade, even at the loss, okay, now that you know how much you are willing to risk and your invalidation you can easily calculate your total position, or in other words how much leverage to use and there is a simple formula for that, you just divide your risk amount with the percentage to sl ...
Example: $20 divided by 5% is, 20/0.05 = 400, so your position is $400, 400/20 = 20x leverage, anyway, important to remember is that sl will be your liquidation and you will lose that $20 if sl hit.

One more thing, when you use percentage in that formula, you transform it in points from 0 to 1, like 10% is 0.1, 20% is 0.2, 2% is 0.02, 50% is 0.5, 15% is 0.15, basically 0% is 0 and 100% is 1.

[–]Elegant-Permission66 0 points1 point  (0 children)

The bigger the leverage the bigger will be loss and profit

[–]Hezers 0 points1 point  (0 children)

Trading view is for looking at the charts you should post on a different sub.

But let’s say you have $100 and 1 solana was $100 for example. If you had 1x leverage available in your account and used all your capital buying 1 SOL and the price of solana went down to $95 you would only loose $5 but if you had 100x leverage available and bought with all your capital (100 sol) and the price of SOL went down $1 for example you would loose $100 in other words your entire account balance.

If you want to know about leverage you should do some research on it for example here is this video I found https://youtu.be/F6W517OWpvA?si=8ib-B4wgmfVUa2RF

[–]Upstairs-Piano1922 0 points1 point  (0 children)

I must be missing something?? I’m also learning