How does leverage work?
Updated
Here's a simple example to understand how leverage affects your returns.
Without Leverage
Suppose you have 100 USDT and Bitcoin (BTC) is trading at 10,000 USDT. You can buy 0.01 BTC.
If BTC rises by 10% to 11,000 USDT, your profit would be 10 USDT.
Your return on equity (ROE) would be 10%.
With 10x Leverage
Suppose you use the same 100 USDT as margin with 10x leverage.
You can open a position worth 0.1 BTC.
If BTC rises by 10% to 11,000 USDT, your profit would be 100 USDT.
Your ROE would be 100%.
While leverage can amplify your gains, it can also amplify your losses if the market moves against your position.
