Leverage is a double-edged sword in the investment market. Many investors are attracted by the promise of "small investment for big gains," but often overlook the hidden risk of liquidation. This article will comprehensively analyze the mechanism, advantages and disadvantages, and practical strategies of leveraged trading to help you maintain rational judgment in leveraged transactions.
What is leveraged trading? A deep understanding of the borrowing investment logic
The core concept of leveraged trading is simple—using borrowed funds to amplify the size of an investment. Suppose you have 100,000 yuan in principal and borrow 900,000 yuan from a broker, then the total investment amount reaches 1 million yuan, which is a 10x leverage.
Ancient philosopher Archimedes once said, "Give me a place to stand, and I will move the Earth." In the financial markets, the power of leverage is indeed astonishing, but it also implies the need for cautious operation.
Leveraged trading is not limited to the stock market. In fact, leveraged trading covers multiple fields:
- Margin trading in the stock market