What is Leverage:
Leverage is the ability to control a large contract value with a relatively small amount of capital. Exchanges and brokers provide leverage to their users in the form of a credit line and users pay a small fee of interest in return for borrowing that amount of capital used to boost their contract values.
Example of Leverage:
If a user would like to open a position of $1,000 with 100:1 or 100x leverage, then for every $1 being put by the trader, the broker/exchange is providing $99 above that to boost the trader’s position. The $1,000 position of the user will end up having a grand total of $100,000 in contract value.
Pros of using Leverage:
- With a smaller amount of capital, traders will have the ability to open larger sized contracts
- Larger profit potential with smaller amounts of capital invested
Cons of using Leverage:
- Increased amounts of risk. Leverage is suggested for more experienced traders with risk measurements in place to protect against inverse market conditions
- With more capital, comes more responsibility and traders must keep track of their open positions either manually or through the use of automatic trading software.
What we do to help:
At Globe, leverage is set automatically to help protect traders from using large amounts of leverage with extremely small amounts of capital. The smaller the amount of capital, the faster any small shift in market conditions could liquidate a trader’s position
- We give users access to up to 100x for free
- We have an insurance fund in place that makes sure that user’s accounts will never drop below 0. If they do, the insurance fund will reimburse the trader's account and bring their account value back up to 0.