Many give you an extremely complicated answer to the question, what is a leverage effect? Yet, leverage is simply explained. When buying stocks, cryptocurrency, currencies and many other financial products, traders rely on their own strategies in trading financial products. In the end, it’s always a bet based on information such as news in economics, finance and politics or gut feelings and psychology as in cryptocurrencies. If trade are very sure about a price jump (profit), take additional capital to make more profit: X2, X5, X10 and more – here is the explanation of how the leverage effect works:
What is leverage in financial products?
It’s not just real estate that has the leverage effect for good returns, you need to know about the leverage effect in financial products as well.
I myself, for example, lost a lot of money in the beginning because I didn’t notice the X20 at a new broker – tip: take your time for trading – silver plummeted by a few % afterwards.
The collapse of the silver price I have noticed at the edge, thought ok, are only a few hundred euros. Not quite, it was a few hundred euros x 20. That within a few hours.
Risk increases / capital increases
Leverage means increased capital / risk.
Lever quickly explained
For pretty much all products, you can use leverage in trading apps and with brokers. Simply put, a short-term loan from the broker. This increases the profits and (!) the risk. You give $1,000, take a leverage of 10, and you have $10,000 of capital tied up.
X10 = from 1.000 you make 10.000
Table: X10, X20 and X30 Levers
Examples of levers:
|5.000 $||1:1 / X1||5.000 $|
|5.000 $||1:2 / X2||10.000 $|
|5.000 $||1:5 / X5||25.000 $|
|5.000 $||1:10 / X10||50.000 $|
|5.000 $||1:20 / X20||100.000 $|
|5.000 $||1:30 / X30||150.000 $|
Whether it’s cryptocurrency, currency trading, stocks, commodities or precious metals, these 3 strategies will help you understand the basic stock market game. I developed these 3 strategies to help beginners and novices understand the mechanics in a nutshell. Since I grew up with bitcoin rather than stocks, here in particular a strong reference to digital currencies. But the mechanisms or strategies are the same for these 5 investment types: cryptocurrency, currency trading, stocks, commodities or precious metals. I would exclude ETFs and index funds here, as the risks and price fluctuations are significantly lower here.
Stock, ETF, Crypto: My Experience / Mistakes
Stocks, ETF, Forex, Cryptocurrency, Social Trading – Here’s a little list of a few learnings that cost me money but are so simple you should know them! You want to buy stocks, index funds, cryptocurrency like Bitcoin or Ethereum, foreign exchange (currencies)? You’re thinking whether house bank, direct bank, online broker or app? Trading all on your own at risk or new options like social trading via app? My experiences and mistakes!