I’ve said this before and will say it again (I’ve seen many good soldiers killed by it):
Leverage should be understood as an accelerator of time rather than a multiplier of risk.
I am almost certain the person cranking it to 10x isn’t sitting there thinking, “I would like ten times the variance.” Nah, he is thinking: I have 100K and I just cannot tolerate how fucking long the unlevered path to 1M takes.
The algo has completely fried our sense of how long that path is supposed to take. It disproportionately feeds you the 20-year-old who supposedly made $30M or the token that hit 100x overnight, and now with social trading you get to watch all of it happen live.
So you end up recalibrating your clock against outliers.
Add to that the fact that we are now being called uncs and plumbers at 30, and suddenly making it at 35 feels mediocre.
It’s all a lie.....DO NOT believe it.....It’s an artificial deadline for success created by capitalist propaganda.
If you are thinking or using leverage, understand what the actual fuck you are getting into.
The more leverage you use, the less room there is for anything to go wrong. At zero leverage, being “right eventually” can still make you money, but as you crank it up, “eventually” starts disappearing. Being right on direction is no longer enough if the move happens too late or price takes the wrong path before getting there.
And it gets worse once you understand ergodicity.....If you are a leverage junkie, you probably haven’t heard the word, so let me introduce you to it:
Your outcome is determined by the sequence you live through, not by the average across hypothetical outcomes, and if one event in that sequence wipes you out, everything that could have happened after it becomes irrelevant.
So when you say, “I only have a 10% chance of liquidation,” you are usually thinking about that trade in isolation. But you are going to trade again and again.....keep introducing a small probability of terminal failure into a long enough sequence and eventually that probability has a very good chance of finding you.
Which is why the obsession with being early in life becomes so destructive. It makes you waste the one thing you have in abundance: future attempts. Do not collateralize them through leverage because you think you are running out of time.
Get rid of that moronic idea.....You are not old at 30, 50 or 60.