Skip to main contentKey issues and the reality of leverage
You have 100x leverage, but most traders will not use the maximum leverage, because that would cause instant liquidation in most cases, and in rare ones the profit can be significant.
Now some fearless traders they would add to their winning position, this is the correct strategy, as you don’t need a 90% win rate to make a profit in the market, 20% win rate is really what you should be aiming for.
Liquidation usually has several components that you need to understand, it’s not a fixed level, it will move slightly in favor or against, most traders don’t know this, but apart from price action, maintenance margin and funding fee play a significant role. Exchanges charge a liquidation fee, which will be charged from your maintenance margin amount, usually 1.5%, now this is a significant amount, say your open position is valued at $10,000.0 if your true leverage is 10x, regardless of your margin balance, 1.5% of $10,000.0 is $150.0, now add a predicted closing fee and funding fee to that, not only you will never be able to use your full margin amount, your liquidation price is always much closer than what’s displayed.
Knowing that, as well as the relationship between liquidation range and risk tolerance, for most traders, their psychology will most likely work against them. That’s why traders even though use less leverage, but still lose their accounts over and over, psychology is baked in your brain, consistant loss will reinforce that neural link, it is very difficult to change. As they say: “Companies change, but human psychology doesn’t.”
If you look at what large investment banks do, as well as some of the top hedge funds in the industry, they don’t use their own capital, maybe some do intially, those are called first-loss capital, in order to get more investment to pass the minimum required capital to open a hedge fund. They always use clients’ capital for most if not all of their trading operations, with proper risk management and supervision, pro traders can remain level headed, with external funding, their capital is practically unlimited to some extent.
For solo traders, usually capital is the biggest issue, as they lose, even just a few trades, their next trade will likely be much smaller than first two, thus much harder to get back to where they started, let alone make a profit.
Maximizing margin utility rate
You have $1,000.0 initial capital, and you want to double it, you know with that amount, it is very risky, instead of risking it all in a cross margin account, we allow you to use $5,000.0 of public funding, this 5x capital is what’s being traded on exchange, and allow a bit of loss buffer, with 100x leverage on exchange, you now have $500,000.0 buying power, then you divide it into 4 equal parts, and allow micro traders to participate, if you can bring enough supporters it is possible they would boost your margin to $2,000.0 or more, now your risk is evenly distributed, allowing you to add more to your position, now you’ve basically doubled your actual at risk capital and reduced your own risk by 50% or more, as more people participate, you would eventually reach 100% utility rate of your capital.
Why would micro traders support you
Believe it or not, there are a lot of traders who are really tight on money, they don’t have a lot to trade with, it is not practical for them to trade with $10 or $20 dollars, because the risk for them is just too great and profit too insignificant.
If they put $10 to add to your margin to support you by trading your token, they would reduce your liquidation risk and what’s best for them, is they share the same liquidation risk you have. For example if they trade normally with leverage, their tiny capital would mean their liquidation risk can be just $100 if trading BTC, now because they long or short your token, their liquidation risk becomes $3000, and they have the potential to profit more than they would on an exchange. 
