What is the effect of leverage on profits and losses?
Leveraged trading is not recommended for users who want to enter the crypto currency market. The cryptocurrency market itself has a lot of price fluctuations, and if you can not get the necessary results in the field of exchange proof before that, it is natural that when it comes to leveraged trading, you may simply lose all your asset.
When you open a leveraged trade in the futures section, your profit and loss increase depending on what your leverage number is; Of course, this percentage that increases is not our total profit, but eventually part of it decreases as a commission.
For example, we open our trade with Leverage 10 and the asset we invest in our trade is $1,000. Our $1,000 asset is multiplied by 10 leverage. That is $10,000. When we trade with this amount, if that trade makes a 5% profit, given that the leverage is 10, that 5% multiplied by 10. That means 50% of the profit, of course, the commissions will also be reduced.
But the opposite point is that if our transaction leads to a loss, we simply lose 50% of our asset. Now, in the parts that we are working on according to this leverage, there is a part called liquidation. The exchange will keep our money for a while. As long as the main asset that we have given to the exchange is enough to cover our losses. If the loss becomes more than that and we reach to the point of liquidation, the exchange will take all the asset from us. The worst case scenario is that your capital is zero.