The financial leverage effect can be understood as an amplifier. After using financial leverage, the gains and losses will increase exponentially according to a certain proportion. Financial leverage is very common in futures trading. For example, in cotton futures trading, the first-hand cotton is 5 tons. Assuming the contract price is 1 000 yuan, you can get this first-hand trading order as long as you pay 5% of the contract price, that is, 500 yuan. During the holding period, if the price rises to 65,438+0.65,438+0,000 yuan, it will rise by 65,438+00%. At this time, when the contract is sold, the money earned is 1000 instead of 50, and the income is enlarged by 20 times. Of course, the reverse is also true. If the contract falls by 10%, the loss will be 1 000 instead of 50, and the loss will increase by 20 times. The greater the leverage, the more obvious the effect of making money and losing money.