Handel Z Dzwignia Binance

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Leveraging financial instruments is a crucial tool in both traditional and cryptocurrency markets. It allows traders to maximize their capital efficiency by not having to lock in all their funds. With the introduction of futures and options contracts, leverage also helps bring liquidity to the market. However, as the use of leverage amplifies both potential profits and risks, users must exercise caution at all times.

Excessive leverage or improper use of it are common reasons why many novice traders fail. It’s like aiming for a home run with every swing of the bat – this strategy is highly unsustainable. Needless to say, trading in a high-risk environment where it’s all or nothing, and a small mistake can wipe out a trader’s capital, is not the kind of environment Binance supports.

Mistakes happen in trading; no person or perfect algorithm can accurately predict every market move. To protect your capital, self-worth, and the opportunity to learn from mistakes, over-leveraging should be avoided. Particularly in the highly volatile and unpredictable world of cryptocurrencies, excessive leverage can seriously hinder your chances of success in a trade and potentially lead to unnecessary losses.

At Binance, we believe that all our clients should fully understand the impact of leverage and the circumstances in which it can significantly harm the likelihood of a profitable transaction. We also believe that allowing excessive leverage is not in the best interest of our clients, our company, or our industry.

How Does High Leverage Affect Your Trades?

Leverage not only increases your potential losses but also increases transaction costs. Transaction costs associated with high leverage can gradually drain your capital.

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Let’s assume you have deposited 500 USDT in your Binance futures wallet. You decide to open a position with 100x leverage using a 500 USDT deposit, resulting in a total exposure of 50,000 USDT (500 x 100). Considering the standard taker fee of 0.04%, the cost of opening this position will be 20 USDT – that’s 4% of your account value!

Just with one trade and in a market that hasn’t even moved yet, you have to calculate 4% into your overall profit and loss calculation. As a result, if your position turns out to be a loss, your account balance will decrease, increasing your effective leverage. Additionally, when trading perpetual contracts, you incur funding fees, which are charged every 8 hours. Assuming a low funding fee of 0.01% (or 0.04% daily), this would result in an additional deduction of 20 USDT per day from your account balance.

Therefore, investors must consider the costs associated with high leverage as they can significantly impact your account over time. The higher the leverage, the higher the transaction costs as a percentage of your trading capital.

This demonstrates how excessive leverage nullifies the likelihood of success in your trade. It is due to the interplay between financial leverage and transaction costs. In other words, high transaction costs as a percentage of your trading capital can ultimately work against you.

If your margin is less than 100x the market value of your position, your chances of losing increase rapidly. This is because expenses reduce your margin capital, which increases the probability of liquidation.

Measures Taken to Avoid Excessive Leverage

Binance is the first cryptocurrency exchange to establish a Responsible Trading program, dedicating resources to further educate users about the dangers of trading and introducing safety measures, including leverage limits, addiction prevention features, and a “cool-off period.”

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We are increasingly engaging users and are aware of the greater responsibility to protect them as global adoption accelerates. However, we remind everyone that the cryptocurrency market is risky, and all users who wish to engage must exercise caution and make their own assessments. Beginner traders should exercise caution and practice responsible trading. That’s why we require users to complete mandatory quizzes and watch instructional videos when registering for futures contract trading.

Additionally, we have also limited the maximum leverage available to new accounts to further enhance consumer protection. On July 19, 2021, Binance Futures began restricting leverage levels to a maximum of 20x for accounts opened within 30 days.

This new rule was further enhanced on July 27 when we decided to extend the leverage limits for new accounts from 30 days to 60 days. This means that new futures accounts will not have access to leverage exceeding 20x within the first 60 days of registration.

While the majority of Binance users do not utilize high leverage levels, this measure is an additional way for us to help protect new users on our platform.

How to Choose the Right Leverage Level

We encourage users to avoid using maximum leverage out of habit during trading. Our maximum allowable leverage provides flexibility when you need it, but you should always choose a reasonable leverage level in normal trading.

Before deciding on a leverage level, investors should familiarize themselves with generally accepted guidelines. The three most basic leverage principles are as follows:

  1. Keep leverage low.
  2. Use stop orders to limit losses and protect capital.
  3. Limit your capital to 1% or 2% of your total trading capital on each position.
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Traders should use the leverage that suits them. For example, if you are skeptical or new to cryptocurrency trading, a leverage of 5x or 2x would be appropriate.

The appropriate leverage level is determined based on the trader’s knowledge, risk tolerance, and comfort level when trading in the cryptocurrency markets. Beginner traders should always exercise caution as they are still learning to trade and gain knowledge.

Final Thoughts

Responsibility lies not only with the users. Every exchange must take responsibility for educating its users and enabling them to use the platform’s services and features safely.

Binance will continue to invest efforts and resources into the security of the platform and risk management mechanisms to secure and protect our users and their funds. Additionally, as regulatory frameworks for the young cryptocurrency industry take shape worldwide, Binance is taking concrete steps to ensure compliance and cooperation with regulatory bodies to protect users, foster innovation, and build a fair and sustainable industry.

Remember, trading cryptocurrencies presents substantial risks. Always take caution, research, and assess the risks before engaging in any trading activities. Stay informed, and practice responsible trading to safeguard your funds and increase your chances of success.

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