Why 20x Leverage Doesn't Mean Bigger Positions (Most Traders Get This Wrong)

Описание: FINANCIAL INSTRUMENT THAT ALLOWS A TRADER TO INCREASE HIS TRADING POSITION WITH BORROWED FUNDS PROVIDED BY AN EXCHANGE OR BROKER

OPENING A POSITION USING
LEVERAGE
position amount ($1000)
OPENING A POSITION WITHOUT
LEVERAGE
position amount ($1000)
$50
20 leverage
(Initial margin)
Leverage - 20
Leverage - 1
Own deposit for opening
Own deposit for opening
a position $50 instead of $1000
a position $1000
Initial margin is the amount of collateral required to open a leveraged position
Initial margin = position amount / leverage. To open a position of $1000 with leverage of 20, you will have $50 of initial margin involved in the trade

THE SIZE OF LEVERAGE DOESN'T AFFECT
THE POSITION SIZE.
LEVERAGE MEANS THAT LESS EQUITY IS INVOLVED IN THE TRANSACTION
EXAMPLE: YOU WANT TO OPEN A POSITION FOR 1 BTC.
IF YOU CHOOSE LEVERAGE 1, YOUR FUNDS IN THIS POSITION WILL INVOLVE 1 BTC.
IF YOU CHOOSE LEVERAGE 10, THE POSITION SIZE WILL REMAIN 1 BTC.
BUT ONLY 0.1 BTC OF YOUR FUNDS WILL BE USED IN THE POSITION

#Trading #ForexTrading #CryptoTrading #StockTrading #technicalanalysis

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