A user with high leverage, trading at 125 times, closed their position with a 4% profit, but why does the asset still show an 8.5% loss?

Many people may have such questions: Clearly, when trading with high leverage, they made a 4% profit, so why does the final account show an 8.5% loss? The reasons behind this are not complex, but it is very important for many beginners to understand this.

First, we need to clarify the basic principles of leveraged trading. When trading at 125 times leverage, you are actually using a small portion of your capital to control a position much larger than your capital. For example, if you have $1,000 and use 125 times leverage, you are actually trading a position of $125,000. Leverage amplifies your profits, but it also amplifies the risk.

In this case, even if the market's fluctuations are small, the price fluctuations will be magnified by 125 times. If you get the direction right and the market rises by 4%, then your actual profit is 125 times 4%, which equals a 500% return. However, if the market moves slightly away from your expectation, the losses will also be magnified, and the extent of the loss may far exceed your initial investment.

Under high leverage, even if you achieve a 4% profit, the final account change also needs to consider the "compound interest effect" brought by leverage. If you are using 125 times leverage, it means your initial capital is actually "compressed" — that is, your actual capital will only be touched if your account suffers a certain percentage of loss. For example, when the market fluctuates, even if you temporarily gain a 4% profit, the actual account balance change is calculated according to the leverage multiple. You may have already "eaten away" part of the profit through other trades or slippage, or due to hidden costs such as fees and funding costs, leading to profits being "devoured", so the final account balance shows a loss.

If you find yourself feeling helpless and confused about trading, and want to learn more about cryptocurrency and cutting-edge information, click on my profile to follow me. $XRP $BNB $SOL #加密市场调整 #美国加密立法或将重启 #BTC上攻11万？ #2025有哪些关键叙事？