top of page

The Power of Leverage: How to Use it Wisely to Grow Your Trading Profits 📊🔝

Updated: Dec 28, 2023

Dear trader, welcome back to our blog!


Today, we introduce you to a powerful tool that, when used correctly, can significantly increase your profits. But be careful, because it is a double-edged sword.


Many cases can be mentioned where this tool was not used correctly and this led to complete capital losses for many investors due to not knowing how to use it wisely.


What is leverage?


It is a mechanism that allows you to access a larger amount of assets than you can buy with your current capital. It allows you to enter into larger trades (functioning as a loan) by paying only a fraction of the total required value.


Who grants the loan? The broker you trade with. It is a commitment to repay later, with interest, the money you are using to open the position you want.


How does leverage work in trading?


Let's take an example:

John has $1,000 in his trading account and wants to buy 10 Bitcoin futures contracts. The broker sets the value of each contract at $1,000, so the total trade

would be $10,000.


Without leverage, John cannot open this position because he does not have enough capital. However, if he uses a leverage of 10:1, he would only have to establish a margin of $1,000. The broker provides the remaining $9,000.


If the price of Bitcoin goes up, John would earn a profit of $1,000 for each contract he bought. In total, his profit would be $10,000. On the other hand, if the price of Bitcoin goes down, John would assume a loss of $1,000 for each contract he bought. In this case, his loss would be $10,000.


So let's say that both John and you need to make sure you have your feet firmly on the ground before launching into investing with this method.


The real scenario: what using this technique entails


Multiply your profits: As long as the market moves in your favor, your profits are likely to be much higher when using the tool.


Access assets with high prices: Even as a beginner, you can buy assets of great value in the market, an ideal situation especially when you do not have too much capital.


Greater risks: The more you risk, the greater the possibility of loss. If the market moves against your predictions, your losses will be much greater than they would be without using leverage.


Requires sufficient practice and experience: Get good advice from experts to understand well. This method has its own process for each asset, in each market. Discipline and intelligence are essential.


How can I become a professional in this technique?

As you can imagine, there are many ways to professionalize this technique. But, here are some tips:


Take care of your first investments: It is not necessary to use high leverage to generate profits. Start with low-value leverage and see how it goes. Based on your results, gradually increase as you gain experience and compare your journey with your community. You should avoid using leverage in the face of uncertainty or little chance of winning in a particular position.


Apply stop-loss: It is an essential tool to limit your losses. It is an order that automatically closes your position if the price reaches a predetermined level that you set in advance. This is an excellent risk management measure in investments, in this case trading.


If you want to win big, study a lot: You need to be sure of what you are doing, understanding all the factors at play.


As we always say, building your own criteria, studying and developing techniques and resources that allow you to flow better with the market is the first step. The challenge is not just to reach the summit, but to know how to take advantage of the shortcuts along the way and always keep profitability on our side.



We wish you all the best in your trades this week, have a great week!





REFERENCES

For this article, prompts have been used to request information

interpreted and provided by AI (Google Bard). Written and edited

by Kevin David Terán and verified by Pedro Arizaleta and Erwin Sánchez

Comments


Smart Trading Indicators Support team

Our support team
is always there for you.

ISO Smart trading indicators AI Logo

© 2023 by Smart Trading Indicators. All rights reserved.

  • Telegram
  • Instagram
  • X
  • Youtube
  • Facebook
  • TikTok

Trading in financial markets is inherently risky, and a significant number of traders end up losing money. The contents and services provided by SMART TRADING INDICATORS LLC are designed for informational and educational purposes only. The material should be viewed as hypothetical and used primarily to demonstrate our product. It is not intended to serve as financial advice. Decisions regarding buying, selling, holding, or trading in securities, commodities, and other investments carry inherent risks. Such decisions should ideally be made based on the advice of qualified financial professionals. Remember, past performance is not indicative of future results.

Hypothetical or simulated performance results have certain intrinsic limitations. Unlike actual performance records, simulated results do not represent real trading. Additionally, since the trades have not actually been executed, the results may have under-or-over compensated for certain market factors, such as a lack of liquidity. Simulated trading programs are generally also developed with the benefit of hindsight. We make no claim that any account will or is likely to achieve profits or losses similar to those shown in our materials.

The testimonials presented on our website are individual experiences of clients who have used our services. They are not indicative of future performance or success and may not reflect the experience of all our clients.

 

As a provider of technical analysis tools and services for charting platforms, SMART TRADING INDICATORS LLC does not have access to personal trading accounts or brokerage statements of our customers. Consequently, we cannot confirm whether our customers fare better or worse than the general trading population based on our products.

Our charts are provided by TradingView, upon which our tools are built. TradingView® is a registered trademark of TradingView, Inc. (www.TradingView.com). TradingView® is not affiliated with SMART TRADING INDICATORS LLC.

This statement is a summary and does not represent our full Disclaimer. We strongly encourage you to read our full disclaimer for a comprehensive understanding of the risks involved in trading and the use of our products.

Our services may include tools and analytics powered by OpenAI technology. It's important to understand that while these tools use advanced AI algorithms, they do not guarantee trading success and should be used as part of a broader trading strategy.

Additionally, our community and services may be accessible through Telegram. Participation in our Telegram channels or groups should be viewed as a platform for sharing information and ideas. It does not constitute a recommendation for trading decisions.

Always approach trading with caution and consider seeking advice from financial professionals. Our goal is to provide tools and resources to aid in your trading decisions, not to replace diligent market research and professional advice.

bottom of page