Understanding Leverage in Trading: Myths and Realities

The reality behind leverage in 2025

Leverage. A concept often misunderstood. Novices in the trading world frequently misinterpret it. They see it merely as a way to amplify their market exposure. Not quite. In reality, it is more of a risk management and reduction tool. At least in theory.

What is leverage?

It's simple. You borrow to increase your position. With €100 and a 2x leverage, you're playing with €200. Half is yours. The other half? Borrowed. Your potential gains double. Your losses too. Lose 50%, and that's liquidation. Logical. The lender can't risk more. It seems many forget this.

The Real Objective of Leverage

Funny how misconceptions persist. Leverage isn't really there to maximize your profits. That's not its primary purpose. By 2025, it becomes even more obvious. Markets have evolved. With 2x leverage, you invest 10% to control 20%. Not bad, right? It frees up capital. You can diversify. Put your eggs in several baskets. Kind of surprising for those who only saw leverage as an amplifier of gains.

Current Trends and Precautions

Traders who know what they're doing are now using more modest leverage. Especially when there's a lot of movement in the markets. Some platforms still offer huge ratios. But the pros? They generally stay under 10:1. They prefer to last rather than shine briefly.

These EGARCH models. Not easy to understand. But they seem effective in assessing this volatility asymmetry in the crypto world. More precise tools? Maybe. Not entirely clear for the average trader.

An essential tip for beginners

Leverage does not magically create profits. No. It limits your capital exposure. It allows you to participate in significant movements. But be careful. Used thoughtlessly? Your capital will evaporate if the market goes against you. Brutal. Fast. Approach it with caution. Understand its true role.

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