Is Leverage Good or Bad?

Before you read: None of this is financial advice. DYOR

Leverage trading is a double-edged sword. It instantly multiplies a paltry capital to several times its worth. To put a spin on the line famous line: With bigger capital, comes bigger risk. Uncle Jimmy was a wise man.

Per Wikipedia: In finance, leverage is any technique involving borrowing funds to buy things, hoping that future profits will be many times more than the cost of borrowing. If I only have $100 to trade, but I am sure that I have a sure winner, I can borrow some money from my trading platform. I can choose how much leverage is best for my needs. I usually choose 10x leverage or 10 times my original capital. So if I choose to long (bet that the price will go up) and the price did move to the upside by 10%, then my original capital of $100 will earn $10. But since I have a 10x leverage, that $10 profit will turn to $100. The trading platform will of course deduct some transaction fees. It is best to know all the costs before using leverage trading

So what if my technical analysis is wrong? My loss will also be multiplied. Based on the example above, a 10% move to the downside will wipe out my position. The trading platform always gets their money back plus all the fees involved. My position will be closed before the price devaluates by 10%. Yes, the house always wins. Knowing the fees is always a good idea.

To lessen the risk, a trader can always put a stop-loss (SL) order. There is also a take-profit (TP) order. The position will automatically be closed by either buying or selling, once a pre-determined price has been reached. The hard part is determining the right price - this is where technical analysis comes in.

Is it for everybody? Anybody can try. But unless you have a solid understanding on how the market moves, you are just risking your capital Even experienced traders don't have a 100% win rate. If Fibonacci retracements, RIS, EMAs, and BOLL are just alien words to you, then you probably need to step back and reevaluate your trading techniques. There are several resources on the internet. I bet your own trading platform has some sort of trading tutorial.

We all have different risk appetites. So you are the only person who can decide on what is acceptable or not. I personally started trading without any leverage. Once I got the hang of it, I started with a small leverage account. I incurred a lot of losses before I got a decent win rate. I am still learning and still a bit confused.

I hope we reach the moon.