What is the difference between 50 times and 100 times in currency circle contracts?

Contract trading in the currency circle is one of the most popular strategies at the moment. Contract trading actually refers to a trading method in which investors sign a contract to buy or sell an asset at an agreed price at a specific time in the future. Investors can choose different leverage multiples for trading to obtain high profits. When choosing high multiples, there will be 50 times, 100 times, etc. Some novices still don’t know the difference between 50 times and 100 times for this contract? Just making random choices creates high risks. The difference between the two is mainly reflected in the risks and potential benefits. The editor below will tell you in detail.

What is the difference between 50x and 100x contracts?

The difference between 50x and 100x leverage in cryptocurrency contracts is mainly reflected in the risks and potential returns. Leverage indicates how much capital you can use to trade, that is, using less margin to control a larger position. The following are the detailed differences and impacts:

1. Definition of leverage multiple

50 times leverage can control 50 units of contract positions with 1 unit of capital. For example, if you have $100 in margin, you can control $5,000 worth of contracts.

100 times leverage can control 100 units of contract positions with 1 unit of capital. For example, if you have $100 in margin, you can control a contract worth $10,000.

2. Potential gains

50x leverage Assuming that the price of Bitcoin increases by 1%, the value of your position will also increase by 1%. Because you use 50 times leverage, a 1% price change will bring 50% profit.

100x Leverage Similarly, assuming the price of Bitcoin increases by 1%, the value of your position will also increase by 1%. Since you are using 100x leverage, a 1% price change will bring 100% profit.

3. Potential Risks

Similarly, a 1% drop in market price will cause the value of your position to drop by 1%, which is a 50% loss.

100x leverage A 1% drop in market price will cause the value of your position to drop 1%, that is, a 100% loss, which usually results in forced liquidation (liquidation).

4. Margin requirements

The margin requirement for 50 times leverage is lower. For example, if you want to open a contract worth $5,000, the margin you need to provide is 5,000 / 50 = $100.

The margin requirement for 100 times leverage is lower. For example, if you want to open a contract worth $10,000, the margin you need to provide is 10,000 / 100 = $100.

5. Forced liquidation (liquidation) price

50 times leverage Because the leverage is low, forced liquidation will only be triggered when the price fluctuates more. The market price needs to fall by about 2% (taking into account fees and slippage) before a position is forced to be liquidated.

100x Leverage Because the leverage multiple is high, forced liquidation will be triggered when the price fluctuation is small. A drop in market price of about 1% (taking into account fees and slippage) may lead to forced liquidation.

6. Transaction Fees and Interest

Fees Using higher leverage is usually accompanied by higher transaction fees and interest. Fee structures vary from platform to platform, but generally speaking, fees will be higher for high-leverage trades.

Interest leverage trading requires payment of financing interest, and the interest of 100 times leverage is usually higher than that of 50 times leverage.

7. Psychological Pressure

Although the risk of 50 times leverage is still high, compared to 100 times leverage, the psychological pressure is relatively small. Market prices need to fluctuate more significantly to affect your margin.

100 times leverage brings a lot of psychological pressure, because small fluctuations in market prices will have a huge impact on your margin, so you need to pay close attention to market trends.

Does a 50x contract make more money than a 20x contract?

In currency contract trading, the leverage ratio directly affects potential returns and risks. Specifically, the difference between 50x leverage and 20x leverage is the extent to which each unit of price movement affects your investment return.

Using 50x leverage, for every 1% change in price, your investment return will change by 50%. For example, let's say you invest $100 and use 50x leverage to control a $5,000 position. If the price increases by 1%, your profit will be $50, equivalent to 50% of your initial investment.

Using 20 times leverage, for every 1% change in price, your investment return will change by 20%. For example, let's say you invest $100 and use 20x leverage to control a $2,000 position. If the price increases by 1%, your profit will be $20, equivalent to 20% of your initial investment.

High leverage means high risk. For every 1% price drop, your investment loss is also 50%. Same example, if the price fell by 1%, your loss would be $50. With relatively low leverage, your investment loss is 20% for every 1% price drop. If the price falls by 1%, your loss will be $20.

Due to high leverage, small price fluctuations may lead to liquidation. For example, a drop in market price of about 2% may trigger a liquidation. Due to low leverage, large price fluctuations will lead to liquidation. For example, a liquidation will only be triggered if the market price drops by about 5%.

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