A few days ago, my family gathered for the Lunar New Year, and someone kept pestering me about what a margin call is. At that moment, I just wanted to avoid the topic because it’s too sensitive for me personally. But he was very persistent, chasing me around everywhere, following me wherever I went, so in the end, I had to sit down and explain.

I started with a simple example: Suppose you have 10,000 yuan and buy Bitcoin with that amount. When Bitcoin increases by 10%, you make 1,000 yuan; if it decreases by 10%, you lose 1,000 yuan. That’s called spot trading, like buying stocks normally, and it will never wipe out your account to zero.

But the problem lies in leveraged contract trading. That’s when everything becomes different. I continued explaining: When you open a contract with 9x leverage, the exchange lends you 90,000 yuan, so your capital is now 100,000 yuan. If Bitcoin rises by 10%, your profit is no longer 1,000 yuan but 10,000 yuan! Ten times higher!

His eyes lit up, but I kept going: This also means that if it drops by 10%, your loss also multiplies by 10, which is 10,000 yuan. And when the loss hits 10,000 yuan, which is your actual capital, the exchange will automatically liquidate your position, which is what a margin call is. Your capital drops to zero, and you have nothing left.

I saw the expression on his face change from greed to fear, from interest to confusion. He understood, but it also opened a dangerous door that’s hard to close easily.

Actually, exchanges lend you money not out of kindness. They make money from trading fees, and when your capital multiplies tenfold, your trading volume also increases ten times, and so do the fees you pay. Moreover, the exchange bears no risk because when you get margin called, they automatically cut losses and recover the borrowed money.

There’s a funny but also painful saying: You copy Trump’s moves, Trump copies your moves. Maybe 2025 will be the year for the unluckiest people, those who followed Trump and suffered heavy losses. But in reality, losing is your own fault for not catching the market’s rhythm; you can’t blame anyone else.