I’ll explain what is leverage, how to apply it in etoro, and most importantly who should be using it. Join Etoro 👉 [ Ссылка ]
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
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So let’s quickly talk about what is leverage Using leverage, simply means, you are borrowing money from somebody, in this case from etoro.
So that your capital, (the money you have), increases in size. So when you have gains, those gains are magnified. But also your losses are larger.
Let me give you an example. Let’s say you have two thousand dollars and the stock goes up by twenty percent and you cash in and take the profits.
That means you now have two thousand and four hundred dollars.
So you just made four hundred dollars.
Let’s take the same situation and use a five X leverage. That just means you multiplied your money by five. So now you have ten thousand dollars. Two yours and four that you borrowed.
The stock goes up by twenty percent and you have now twelve thousand and you take the profits. Then you pay back etoro the eight thousand you borrowed to use leverage. And keep the rest to yourself. And you have now four thousand dollars. Awesome right? You just doubled your money with just a twenty percent increase in stock.
But hold on, what if instead of going up, the stock goes down by twenty percent? That means you had ten thousand, but now you have eight thousand left. Then you need to pay back etoro eight thousand for using leverage.
And you are left with nothing…. Zero… That is the risk of leverage. You win big, but you also lose big.
And the problem is that losses are harder to gain back. Losing fifty percent of your money means that you need to gain A hundred percent to get back to your initial amount.
And not only that when you leverage, essentially you are borrowing money from etoro, so you have to pay daily fees for that. It’s definitely not a long-term strategy.
Basically the longer you have a leveraged trade open,
the more you will pay in fees.
Leveraging is pretty simple in etoro, let me show you how to do that.
Ok so who should use leverage. In my opinion, if you are a beginner, don’t touch leveraging.
Unless you have a very strong knowledge of finance and investing, just stay away from it.
Don’t forget, investing is a long-term game.
Obviously, if you just want to gamble with your money, You might get lucky, but most people lose money especially when leveraging.
And as with any investments, make sure you are only investing what you can afford to lose. If you are putting in your life savings, then please make sure you know what you are doing.
Now there is nothing wrong with leverage per se. If you buy real estate and borrow from the bank to do it, you are essentially leveraging your capital as well.
The same thing goes for businesses. It’s just how you use it and you need to calculate the risk if things go wrong.
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