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$BTC #合约 #合约交易 #LiveTradingLog
🗓 10/8 09:30 CST
Leverage doesn’t determine how much you lose; your position size does.
Many people think that lowering their leverage automatically reduces the risk in their account, so when they lose money, their first instinct is to turn the leverage down. But that intuition is actually backwards.
Leverage does just one thing: it amplifies your margin. For the same notional position, whether you open it with high or low leverage, if the market moves the same distance, the absolute amount you lose in your account is exactly the same. Only two things change: how much margin the trade uses, and how far the price can move before you’re liquidated. High leverage uses less margin and puts the liquidation price closer; low leverage uses more margin and puts the liquidation price farther away. How much money you actually lose depends only on the size of your notional position and how far away your stop-loss is—not on the number you enter in the leverage field.
So if you really want to manage risk, adjust your position size and how far away you place your stop-loss—not the leverage number. But that doesn’t mean you can crank leverage up as high as you like without consequences. Leverage determines how much volatility you can withstand before liquidation; if it’s so high that there’s no room for a normal stop-loss distance or for adding to your position later, then the rules you set in advance simply can’t be followed.
Is this how you understood it before?
—— Alpha Quantitative Technology
The above is a market recap and personal opinion. It does not constitute any trading advice, nor is any return guaranteed. Futures contracts involve leverage. Make your own decisions and bear responsibility for your own profits and losses.
$BTC #合约 #合约交易 #LiveTradingLog
🗓 10/8 09:30 CST
Leverage doesn’t determine how much you lose; your position size does.
Many people think that lowering their leverage automatically reduces the risk in their account, so when they lose money, their first instinct is to turn the leverage down. But that intuition is actually backwards.
Leverage does just one thing: it amplifies your margin. For the same notional position, whether you open it with high or low leverage, if the market moves the same distance, the absolute amount you lose in your account is exactly the same. Only two things change: how much margin the trade uses, and how far the price can move before you’re liquidated. High leverage uses less margin and puts the liquidation price closer; low leverage uses more margin and puts the liquidation price farther away. How much money you actually lose depends only on the size of your notional position and how far away your stop-loss is—not on the number you enter in the leverage field.
So if you really want to manage risk, adjust your position size and how far away you place your stop-loss—not the leverage number. But that doesn’t mean you can crank leverage up as high as you like without consequences. Leverage determines how much volatility you can withstand before liquidation; if it’s so high that there’s no room for a normal stop-loss distance or for adding to your position later, then the rules you set in advance simply can’t be followed.
Is this how you understood it before?
—— Alpha Quantitative Technology
The above is a market recap and personal opinion. It does not constitute any trading advice, nor is any return guaranteed. Futures contracts involve leverage. Make your own decisions and bear responsibility for your own profits and losses.