What Risks Should I Consider When Engaging in Margin Trading?

Margin trading involves several risks that traders should be aware of. The primary risk is the potential for significant losses due to market volatility; if the market moves against your position, your losses can exceed your initial investment. Additionally, the use of leverage amplifies both gains and losses, meaning even small market fluctuations can lead to substantial financial impacts. There’s also the risk of liquidation if your margin level falls below the required threshold. It’s crucial to have a risk management strategy in place, such as setting stop-loss orders and only using leverage that you can afford to manage.