Some people confuse margin trading with futures trading, which is a great misunderstanding. Margin trading is spot trading and has nothing to do with futures trading.
What I understand as margin trading is a firm transaction in which a dealer provides a loan. Moreover, there is no limit to the loan term and the loan currency. The collateral we need is a deposit. When our deposits are insufficient to cover the loan losses, they will be liquidated.
So, what are the risks of margin trading?
1。 Credit risk of traders.
If the risk management ability of traders is limited, they are likely to go bankrupt before we go bankrupt, resulting in the loss of our funds.
2。 Our own loan scale has exceeded the safety warning line.
Anyone who has worked in an enterprise knows that when the asset-liability ratio of an enterprise exceeds a certain limit, the liquidity risk is great, and so is our margin. ?
Leverage ratio is not a fundamental risk. There is no difference between the risk of magnifying 200 times and that of magnifying 20 times. The difference is that it is enlarged by 200 times, which provides investors with greater opportunities to use funds beyond the limit. Magnification of 20 times will reduce the order of magnitude of the limit and set necessary obstacles for them to break through their own endurance.
In fact, the biggest risk comes from the trader himself, depending on whether the trader can control his position well. Risk itself has nothing to do with leverage ratio, but only with the proportion of positions.
For example, if the magnification is 200 times, the lowest can be 10k, and the magnification is 20 times, and the lowest can be 100k. At work, the minimum risk of the two is 20 times greater. Because it has to bear the risk of at least 654.38 million units, 200 times, and at least 654.38 million units.
3。 Leverage magnifies not only trading risks and benefits, but also human weaknesses.
At any time, risks and benefits go hand in hand, so leverage itself will not amplify risks alone. So why do many depositors end up losing money?
The main reason is that leverage is more likely to amplify the weaknesses of human nature, rather than the advantages of human nature. In the face of multiplied risks and benefits, many people's greed and fear are magnified to the extreme, which is the root of failure.