How to calculate Bitcoin leverage loss exceeding the principal?
Bitcoin leverage trading loss calculation formula: loss amount = principal x leverage ratio x (1 - closing price/opening price). For example, if you trade 1 Bitcoin using 10x leverage and the opening price is $20,000, and the price of Bitcoin drops to $15,000, the loss will be $2,500, which exceeds the $1,000 principal invested.
How to Calculate Bitcoin Leverage Loss Exceeding Principal
When using leverage when trading Bitcoin, the amount of loss may will exceed the principal invested. The method of calculating the loss amount is as follows:
Loss calculation formula:
Loss amount = principal x leverage ratio x (1 - closing price/opening price)
Detailed explanation:
- Principal: The initial amount invested in the transaction.
- Leverage ratio: The ratio used to amplify the size of the transaction, such as 10 times or 100 times.
- Close price: The Bitcoin price when the position is actually closed.
- Opening price: The Bitcoin price when opening the position.
Example:
Suppose you trade 1 Bitcoin using 10x leverage and the opening price is $20,000. If the price of Bitcoin drops to $15,000, your loss is calculated as follows:
Loss amount = 1 x 10 x (1 - 15,000/20,000) = $2,500
In this case, Your loss is $2,500, which exceeds your $1,000 investment.
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