Difference between High Leverage and Low Leverage: Choices in Cryptocurrency Trading

I have been using high leverage in cryptocurrency trading for a long time, but recently I've been acutely aware of its dangers. To be honest, the allure of high leverage is intense. The feeling of being able to make large trades with a small Margin feels almost like becoming a millionaire. However, I have learned firsthand that it is a double-edged sword.

Main Differences Between High Leverage and Low Leverage

1. Capital Efficiency

High leverage requires less Margin, allowing for more efficient use of available funds. For example, with 10x leverage, only 10,000 yen is needed for a transaction worth 100,000 yen. Conversely, with low leverage, more Margin is required for the same transaction.

2. Degree of risk

This is the most troublesome part. High leverage amplifies profits, but at the same time, it also magnifies losses. Just a slight movement in the market can wipe out an account. A friend of mine got caught in a sudden drop with 20x leverage last month and was forcibly liquidated. With low leverage, there is a higher chance of withstanding such drastic price fluctuations.

3. Mental Pressure

High leverage trading is honestly nerve-wracking. Every time I look at the screen, I feel anxious and there are nights when I can't sleep well. With low leverage, it's much easier mentally. I can look at the market from a long-term perspective without rushing.

4. Trading Strategy

The choice of leverage also varies depending on the trading style. High leverage may be suitable for scalping or day trading, but low leverage is wiser for swing trading or long-term investment. I have learned from my mistakes and now adjust my leverage according to my strategy.

5. Market Adaptability

Exchanges may adjust the margin rate due to market fluctuations. In a volatile market, the margin rate increases, which results in limited leverage. Conversely, in a calm market, the margin rate may decrease, allowing for higher leverage. It is necessary to respond flexibly.

Ultimately, whether high or low depends on your risk tolerance, investment goals, and strategy. High leverage is efficient in terms of capital but comes with greater risks, while low leverage is stable but may not fully capitalize on opportunities. Personally, I have started to aim for moderate leverage after experiencing painful losses.