Leverage is the process of leveraging borrowed money to magnify the profit or loss of a given trade.
With less cash, it enables traders and investors to have a greater stake in the market. Participants in the market may be able to boost their profitability by using leverage, but doing so exposes them to an equally risky downside.
Leverage is sometimes described in the context of trading as a ratio, such as 1:10 or 1:100. The capital a trader must have in relation to the size of the position they intend to control is represented by this ratio. With a leverage ratio of 1:10, for instance, a trader can manage a position worth 10 times their initial investment.
It's crucial to remember that trading everlasting contracts, especially with leverage, involves risk. The profitability of a trader may be considerably impacted by market volatility, leverage requirements, and funding expenses. Traders should be extremely cautious while trading perpetual contracts and have a solid understanding of how they work. To successfully traverse the intricacies of financial markets, thought and risk management are needed for leveraged perpetual contracts.
Disclaimer: any information provided by Foxify as part of the Academy is for informational/educational purposes only and not financial advice. Please always do your own research.