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Academy Blockchain Concept Article
Blockchain Bitcoin OKEx

Leverage

2019.11.21 OKEx

Leverage refers to trading using borrowed money. When using leveraged financial instruments, a trader borrows a multiple of their existing capital to buy an asset with.

Leverage on profitable trades can amplify returns considerably. For example, let's presume that the current BTC price is $10,000. A 10x leveraged position with $1,000 starting capital would allow the trader to buy 1 BTC. If BTC price rose 10% to $11,000, the position would be in $1,000 of profit. Meanwhile, a non-leveraged $1,000 position would return just $100 of profit.

Leverage also increases potential losses. In the above example, if BTC price decreased by 10%, the non-leveraged position would lose $100, while the leveraged one would lose all $1,000 of the initial capital. It's vital to understand these risks before using leveraged financial instruments.

Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

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