LEVERAGED TRADING - THE DEADLIEST DOUBLE-EDGED SWORD

Twitter is full of people wanting to get trained in doing leveraged futures and options trades. New wannabe traders should first have a look at the table below to understand how your capital will look when you are at a certain percentage profit or loss in leveraged trading. Assuming 3x leverage, at 20% price appreciation, your capital will become 160%. However, at 20% price depreciation, your capital will become 40% – a staggering 60% washout of capital.

Yes, the reward seems interesting on leveraged trades, but the risk is too high at the same time. 2 to 3 bad trades can wash out your capital.

A 5% loss in leveraged trade is equivalent to a 15% loss in delivery trade. Hence, you get more room to make mistakes in delivery-based trades. The best approach is to master delivery-based trades and then adventure into leveraged trades after a couple of decades, YES — decades!

I hope this article adds value to your investment decisions. Do share your feedback with me at devang@vkabras.com, call me at +91 99229 32214 to engage further. Visit www.devangkabra.com to know more…