It's time to properly understand leverage trading. Many people start without a clear understanding of what stock leverage means, and this is truly dangerous.

Simply put, leverage is borrowing money from a broker to make trades that are much larger than your own capital. It means you can trade assets worth 10 million won with only 1 million won. Just like using a lever to lift heavy objects, it creates a big result with little effort.

Let's see why this is attractive. If you invest 1 million won without leverage and the price increases by 1%, you make a profit of 10k won. But if you trade 10 million won with 10x leverage and the same 1% rise occurs, you earn 100k won. Small price movements can turn into huge profits.

But here’s what to watch out for. If your profit is multiplied by 10, your loss is also multiplied by 10. If the price drops by 1%, you lose 100k won. What if you use 20x leverage? A 5% decline could wipe out your entire capital. This is the dual nature of leverage trading.

The concept of margin (collateral) is also important. To maintain a position, the broker requires you to hold a minimum amount of funds in your account. If you fail to meet this requirement, a margin call occurs. That is, you are asked to deposit more funds, and if you don’t, your position is forcibly liquidated. Losses are then realized.

Let’s clarify the difference between leverage trading and regular trading. Without leverage, a 10% price drop results in a 10% loss. But with 10x leverage, the same 10% decline results in a 100% loss. This means losing your entire initial capital.

So, who should engage in leverage trading? Those who understand the market well, can manage risks thoroughly, and have extensive short-term trading experience. Beginners who start recklessly will suffer losses. Especially in markets with high volatility and low liquidity, it’s even more important to avoid leverage.

The advantages of leverage trading include opening larger positions with less capital, high capital efficiency, and the ability to trade expensive assets. It also allows diversification across multiple assets and can be used for hedging risks.

The disadvantages are clearer. Losses are maximized. There’s a risk of margin calls. Sudden price swings can cause significant losses. Interest and swap fees accumulate. And the mental stress is considerable, as every price movement can impact your assets.

How to manage risks when actually trading with leverage? First, always set a stop-loss. This automatically closes your position if the price falls to a certain level. Second, carefully adjust your position size. You shouldn’t risk your entire portfolio on a single loss. Third, diversify your investments across different assets and markets.

Regularly monitoring market trends is also crucial. You need to keep checking market conditions, trends, and potential risks to adjust your positions in time. Use trailing stops to lock in profits and protect yourself from sudden reversals.

Over-leverage is strictly forbidden. Especially when market volatility is high. Using extreme leverage like 100:1 makes even small price movements deadly. Always keep a trading journal. Recording why you opened a position, how you closed it, and what you learned helps make better decisions later.

Leverage is used in various financial products like forex, CFDs, futures, and options. Each has different characteristics, so choose the one that fits your trading style.

In conclusion, understanding stock leverage properly and approaching it cautiously can generate profits. But reckless use can wipe out your entire capital. Honestly assess your risk appetite, market experience, and asset size before making a decision.