From the book Investing and Trading: Secrets to Success
What changes when you trade with borrowed money and how to understand leverage.
Watch the chapter on video
Our YouTube channel is originally in Spanish. Some videos may not have an English audio track.
Watch on YouTube ↗Our YouTube channel is originally in Spanish. Some videos may not have an English audio track.
CHAPTER SUMMARY
The idea in one minute
Leverage lets you take on exposure greater than your own capital. The chapter compares structures with different room to maneuver: looking at the multiplier is not enough; you must also understand loan conditions, payments, and possible liquidation.
What to remember
- Greater exposure amplifies gains and losses on your capital.
- A debt’s term does not eliminate default risk.
- Adding collateral commits more capital; it does not erase a loss.
Put it into practice
Simulate how much you would lose if the asset fell 5%, with and without leverage. Compare the result with the money you actually contributed.
Want to go deeper?
Find the full discussion and examples in the book Investing and Trading: Secrets to Success.
Browse all chapters
- INIntroduction
- TOCContents
- 01The evolution of trading
- 02Trading and investing
- 03Different markets
- 04Fast and slow leverage
- 05Spot vs. derivatives
- 06D.C.A. strategy
- 07Diversification
- 08Base and quote currencies
- 09How money works
- 10Financial market cycles, BTC halving, and strategy
- 11Reading Japanese candlesticks
- 12Support and resistance
- 13There is no exact science in this field
- 14What moves markets?
- 15How to identify trends
- 16Ranges
- 17Japanese candlestick patterns
- 18Moving averages
- 19The most popular technical indicators
- 20Filling the GAP
- 21Trading styles
- 22Binary options: the biggest garbage ever to exist in the markets
- 23Fundamental analysis and fundamentals
- 24Financial bubbles
- 25Before learning to win, learn to lose
- 26An asset’s average price
- 27Extreme events
- 28Price action: strategies
- 29Liquidity and market makers
- 30The DeFi world: benefits and risks
- 31Scams and risks to avoid
- 32Risk vs. volatility
- 33Arbitrage
- 34Grid trading in Spot and Futures
- 35The shortest path is the longest path
- 36The circle of success
- APAppendix
- ENDFarewell
Video from the original 2024 edition and a summary prepared for this website. References and conditions in the video may have changed.
Educational content. Trading in financial markets involves a risk of loss; past results do not guarantee future results.