Recently, I noticed that many people misunderstand how leverage works. When I opened a position with 100x leverage, my actual risk was less than the full position. Some believe that a 100x leverage order means you are trading with capital that is 100 times greater than your initial capital. This is incorrect and can easily mislead influencers promoting trades. These influencers can offer trades at any time, regardless of market direction, showcasing impressive profits without explaining the associated risks. For example, I saw influencers boasting about high returns on a position of less than $10, but the actual profit was minimal.
As an example, let's take a margin of $100. With 100x leverage, you can control assets worth $10,000. You have $100, and the exchange 'lended' you $9,900. If you fully utilize this leverage, a market movement of about 0.7% can liquidate your position, losing your $100 margin on the exchange. However, it is not necessary to use all available funds. You can open positions worth $1 (1% of your margin), $10 (10% of your margin), $100 (equal to your margin), or even $1,000 (10 times your margin).
Many influencers encouraging high-leverage trading do so to impress with potential profits often amounting to hundreds or thousands of percent. However, this strategy can easily deceive newcomers. For example, while BTC and ETH may have minimal position requirements, many altcoins allow positions as low as $1. With 100x leverage on these altcoins, you can distribute your $1,000 margin across several small positions, reducing the risk of liquidation. This tactic allows influencers to frequently post seemingly impressive results without significant risk.
It is very important to correctly understand leverage so you are not misled. High leverage can increase both profits and losses, so it is crucial to manage your risk and not fall for influencers' claims of high returns. Always consider your true exposure to risk and the potential risk when trading with leverage.