Question on leverage
Question on leverage
So i am dabbling into trading again and i have a question about leverage. i was wondering if you start out with 100 dollars starting balance and you use 10 leverage and you manage to blow your account, are you liable to pay the full 1000 dollars that leverage gave you? Or you do just lose your initial starting balance?. I am not sure how this works please clear this up for me thanks.
The higher the leverage you used, the higher the risk. If bitcoin is at $25000 and you used 10x leverage to open a long position, the liquidation price would be around $22500, if you used 1x leverage, the liquidation price would be below $1000, that is if bitcoin get below $1000. Because of the high risk, it is done in a way the exchange would gain from trading fee and the loaners would gain from the high liquidation price, only you will not be favoured, but you have nothing to pay after you lose the whole $100.