Risks of using leverage when trading

Don't want to read? Here's a quick note from Matthew:

Hey ProfitFarmers, 

Leverage itself does not increase your risk, it is the fact that it enables you to place a higher volume trade than your account would normally allow.

So in that sense, if you set up a trade on 1x or 100x for a volume of $1000 worth of X coin, a 10% drop in price will still mean a loss of $100.

Where the risk lies

Where the damage is being done typically is if you are using leverage to make that $1000 trade, your account size could be just $100 itself. Using leverage allows that $100 to become a $1000 'bet'. 

That means if your $1000 trade loses 10% or $100, you actually just lost your entire account size and are liquidated (because your account was $100 in the first place). But if the trade goes up 10% then you actually just doubled your account size to $200.

This means that people using very high leverage have to consider that their liquidation price within Binance may be closer to their entry than their desired stop loss.

In simple terms 

Leverage won't hurt you as long as you consider the $value losses you will incur at stop loss. The trading form will ask you for a simple total USDT value of X coin you want to long and your stop loss $ would be that total multiplied by stop-loss -%. 

Other resources:

Creating a Futures API - How to create your Binance Futures API and connect it to ProfitFarmers

Transferring funds to your Futures wallet - How to transfer funds from your Spot Wallet to your Futures Wallet using Binance

What is Liquidation-  https://www.binance.com/en/support/faq/360033525271

How to Calculate Liquidation Price of USDⓈ-M Futures Contracts - https://www.binance.com/en/support/faq/b3c689c1f50a44cabb3a84e663b81d93