Leverage Trading is a financial term that refers to borrowing money to make investments. trading in Singapore can be extremely profitable for those who know what they are doing, but it also has the potential to lead to significant losses if not managed correctly.
In this blog post, we will discuss the basics of leverage trading and the things that you need to know to trade successfully.
The first thing is what it means by “leverage.” In a nutshell, when you invest money with leverage, you are basically borrowing from your broker for a short period of time. This allows you to make larger trades than what would normally be possible if using cash alone.
Leverage can also help protect your portfolio in down markets because it magnifies both gains and losses depending on which direction the market goes in after an investment is made.
On the other hand, leverage also magnifies potential losses. Therefore, in order to protect your position from a margin call, you should use protective stops when trading with leverage.
Secondly, it is important to understand the risks involved when trading with leverage. With any type of investment, there is always some level of risk. When you trade with leverage, that risk increases because you are borrowing money to invest.
It is also important to remember that losses in leveraged positions can be greater than your original investment. So, if you are not willing to take on that greater risk, then you should avoid trading with leverage.