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Leverage Trading for Beginners - Etoro - YouTube
Channel: Social Trading Vlog
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everyone so leverage we've all heard
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about leverage and a lot of people
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asking you know what does it do and why
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why be scared of it a lot of people warn
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against it so here's the eToro home
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screen kind of nice and glossy it is
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blue big picture of a mobile and it
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seems simple and lovely then I'm down at
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the bottom here there's this quaint
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ports a little statement now this eatery
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wouldn't have put this little statement
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here if they didn't have to do by
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European law there's ES MA ESMA they
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introduced regulations Europe recently
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we're making sure that all the trading
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platforms and exchanges and brokerages
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sort of make themselves transparent they
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have to warn the public about certain
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things that's what this is it says CFDs
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are complex instruments and come with a
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high risk of losing money rapidly due to
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leverage 65% of retail investor accounts
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lose money when trading CFDs with this
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provider
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so what's the CFD every time on eToro
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every time we make a trade using
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leverage it turns that trade into a CFD
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which is something you can trade we'll
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get to what that is later on but you
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should consider whether you understand
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how CFDs work and whether you can afford
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to take the high risk of losing your
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money that's a very stark warning that's
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not that's not a small thing for them to
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have to put then it's quite serious so a
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lot of people ask you know what's
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leverage and why is it so risky so this
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leveraged sort of you know bad is evil
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oh is it magic now now is it all it is
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is it's a way of amplifying your trade
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sizes see you if you have $100 and you
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use times five leverage it's like you're
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trading with $500 you know the problem
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with that what's the problem it's
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because well we knew we don't know what
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we're doing all right so there's two
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main things which affect traders really
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and how they trade the big sort of
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stimulators tend to be greed or want to
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make lots of money we all have it and
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fear I don't want to lose my money all
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right
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now fear when mixed with a lot of
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leverage can lead to blind panic rather
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than just fear all right so let's go
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let's try Amazon for instance I'm on my
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trade market space yeah look we're just
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signed up
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we see Apple I mean I've heard of that I
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don't know what you know what it's about
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if I'm new
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litecoin which he's looked Kryptos and
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things there's Google there's Facebook
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I've heard of them this is lovely
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everything that was colorful everything
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looks clean and friendly and it could be
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a bit deceptive so let's go to Amazon
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I've typed in Amazon I go to it here so
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when we knew if I go to this is the
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price of one Amazon stock 1758 I can go
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to the trade screen here a little bottle
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big button says trade and I can place my
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trade now I haven't got this much money
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as it shows here I'm in my virtual
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account which you can go to here to
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trade between virtual and real just
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because I'm gonna make some dummy trades
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and showing you what leverage will do
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and I wanted to sort of be able to make
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that and not have to worry about losing
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lots of money
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here's Amazon I go to the trade screen
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and here's where we can simply buy stuff
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it all looks very very simple and here
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there's some buttons so here's the place
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where I can see the amount that it costs
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Amazon is currently 1762 dollars for one
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share of Amazon all right let's say I go
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to another one let's say I go to Netflix
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they all show that number in the top
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left so Netflix is 294 for one share
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Facebook is currently 142 point one four
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you see the number changing that's
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because the markets are live these are
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live numbers you know so everything has
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its own number its own price for one
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share so in the trade screen that's what
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that is that's the current price for one
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share this the amount is the amount of
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money I'm about to place a trade with I
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want to place a trade for $500 stop-loss
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is an automatic thing where if I lose
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this much get me out of the trade you
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can set it for the trade or you can
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change it whilst you're trading take
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profits the other way around
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I want to make I'm gonna make this
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amount of profit automatically cut it
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off when I make this much money by
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default it's setting that as 50% of my
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size and this one also is 50% of the
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amount of money I'm putting it here's
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the leverage button all right leverage
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times 1 times 1 means I'm not using any
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leverage at all times 1 then it just
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means I'm not using leverage times 2 I'm
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using 2 times leverage so watch the
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unit's change
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0.28 units times to 0.57
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units and buying double the amount times
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five one point four two units okay so
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it's times one times five is five times
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that one point fourteen is here if I
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click times ten it won't let me do it
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it's because Europe put in regulations
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recently again those ESMA rules
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Concepcion yes ma trading rules or
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something and they limited the amount of
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leverage that new people could use to
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try and stop this problem of new people
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using too much leverage panicking and
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just wiping out their accounts the
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majority of new traders apparently using
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leverage blow their accounts as lose all
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their money terrible thing so here if I
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want to use enable high leverage trading
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I have to click continue have to answer
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a bunch of questions which prove that I
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know how to trade or have some financial
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training and then I can use the high
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leverage if I satisfy those requirements
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I don't so I'm going to go back so I can
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use times one times two times five if I
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was trading Forex like sterling against
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this currency pairs I can use different
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amounts of leverage they indices
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different amounts of leverage it depends
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on the assets they'll have different
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amounts of leverage available to each
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okay and it usually depends how volatile
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something is so the more something moves
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up and down that different things a
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different volatile they move up and down
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in during the day or the week of a month
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they're different you know
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so stocks are very volatile they move up
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and down a lot naturally so they will
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only let you amplify that by smaller
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amounts you see because that's what
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leverage does if you're winning you will
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win much faster if you're losing you
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will lose much faster the velocity of
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how fast you win or lose gets higher the
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higher leverage you use and this is the
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problem for new traders all right so
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let's say I go back to Amazon and I'm
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gonna go here this shows you the
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statistics for amaz and this is Amazon's
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trading page this shows you their chart
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all right now on the chart it shows you
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I can click this and I've set it to one
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day so each of these little what they
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call candles these little bars is shows
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one day of activity where it's red it
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means it went down and value is started
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on the top of the candle and went down
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value over the day where it's green is
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started at the bottom of
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and I went up in value over the day okay
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so do you as a newcomer knew how know
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how to read these chats I know I did I
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had no idea all right you can change
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this one day you can have one minute
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charts or you can have fifteen minute
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charts or you can have one week charts I
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didn't know how to read these chats when
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I came in and most new people don't
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write so what happens the problem is
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that I would use see how this line goes
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up it doesn't go up completely straight
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does it it sort of goes up then down
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then off a bit then down down and then
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up then down then up then down up it's
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generally going up but it doesn't get
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there in a straight line now experienced
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trader who studied what they call
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technical analysis which is looking at
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these charts and understanding the way
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things move because there are patterns
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in how things move and why you people
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buy and sell at certain times you study
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technical analysis you'll know if you
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haven't you're going to look at these
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charts and it's like like tossing a coin
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I don't know you'd be right 50% of the
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time so why not you know why not is
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because the really experienced people
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aren't just flipping a coin okay they
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understand generally how things move you
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see and they'll be able to sort of
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predict so if they buy Amazon here and
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it starts dropping they won't just oh my
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god Senate and panic it causes a great
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deal of panic to be seen your money
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dropping very quickly very suddenly and
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that panic can make you close the trade
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when you shouldn't you should hold it
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open maybe this is not investment advice
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but maybe hypothetically you should hold
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it open and the price will go back up
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and you'll make lots of money but okay I
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opened earlier on three trades in Amazon
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okay the time is now roughly it's just
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after four o'clock okay so I open these
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three Amazon trades to sort of show this
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effect all right so at 3:30 I open that
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one for 500 same time exactly 3:30 open
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that one for 500 3:30 same time open
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that one 500 this one here the top one
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has no leverage on it times one leverage
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this one here the second one I've put
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times to leverage on that one this one
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here this one here I've put
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times five leverage honor okay this one
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is five times five leverage you can see
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it in the unit's times one got me 0.28
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units times two got me 0.5 six units and
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times five got me one point four one
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units right this is just I open these
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maybe just over a bit over half an hour
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ago the first one has lost 396 the times
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to leverage has lost 790 the times five
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leverage has lost 1896 see it changing
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1933 alright so this really this is like
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just over half an hour ago and you can
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see the difference in how much they're
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losing now obviously there are some fees
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associated with trading which I'll go
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into in the next video but most of this
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is because Amazon has gone down in value
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since I opened it and you can see that
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all of these are five hundred dollars
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spend the same amount on each one but
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because I used leverage this one times
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two it's like I'm trading with a
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thousand dollars this one times five
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it's like I'm trading with two thousand
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five hundred dollars 5 times 5 mm on
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drew so there we are it's dropped more
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now this effect but when you're a new
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trainer when I was new because I did
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this a lot with gold when I started
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which is highly volatile when you see
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yourself losing money too quickly the
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temptation is the panic because you
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don't know what's gonna happen next you
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don't know it's gonna go up or down you
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don't know what charts mean you know how
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to read that stuff so you can close the
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trade when you really should hold it
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open for like another two hours a two
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hours time it might go up but by
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panicking and closing it you start to
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lock in losses and you lock in more then
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you I was trying to trade bigger to get
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that back and you start chasing your
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losses greed and fear and greed and fear
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and it's very easy to wipe out your
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account so that is why they they caution
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against leverage it's not because
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there's anything wrong with leverage
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it's because the combination of leverage
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and not knowing what's happening is
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dangerous leverage and knowing what's
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happening fine but in the beginning to
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use it before you know it's happening
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it's it's it's it's dangerous because of
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your emotions because of your reactions
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to when the market turns against you
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really so there's those three what I'm
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going to do is I'm going to train
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break this up because you know there'll
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be a lot to digest in the next video
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what I'm going to talk about is the fees
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so we have the spread fees which were
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charged on all trades but over here you
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can see that amazon there's times one
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just says amazon the times two and the
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times five both say CFD next why is that
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so what's a CFD and what are the other
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fees associated with losing leverage
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there's the general emotional risk and
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panic and fear that comes with using
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leverage but what are the fees that are
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also associated with it all right so
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I'll discuss those in the next video did
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