What is Hugo's Way Leverage?
Should you use Financial Leverage or is it risky?
Hugo’s Way is a relatively new company. It was founded in 2017, and it has been in the business for almost 5 years now. It is registered outside of the US, and it is one of the unregulated brokers. For many people, the very fact that a broker is unregulated is a bit troubling. But Hugo’s Way is in the field to build investors’ trust and offer them a good trading platform for all their trading needs.
One of the advantages of Hugo’s Way is the remarkable leverage that it offers. With 1:100, it is one of the best brokers and a favorite among investors.
Financial leverage is not unique to Hugo’s Way. Many companies use this financial tool to gain advantages. But before we dive into the pros and cons of financial leverage, let us first understand the meaning of this term.
Financial Leverage: What Does it Mean?
There is hardly anyone who has stashes of money in the financial world, ready to invest in whatever financial adventure they want. Many businesses and individuals take out loans and promise to lenders to return them with agreed-upon interests. This practice is quite common in the finance world and is one of the cogs that keep the finance machinery running.
Why individuals and businesses may opt for financial leverage may vary. Big or large-scale companies go this financial route to enhance shareholders’ value. On the other hand, individuals use this financial tool to increase their investment returns.
What Does Hugo’s Way Leverage Mean?
At the beginning of the article, we mention that Hugo’s Way offers financial leverage of 1:100. This leads us to an important question: what does this mean? Stock markets are exciting places. The stakes are high – and so is the tension. But if your money is on the line, it becomes difficult to take risks.
People who are solely using their money are way too cautious. On the other hand, those who rely on the many advantages of leverage will be able to get into the real game of stock markets and earn great returns. See it this way: those who have their money invested will see a growth of around 10% in a month. However, those with some leverage will be able to see a 10% increase in a day!
Now, let’s get back to where we started. If Hugo’s Way offers leverage of 1:100, it means that it allows you to trade up to $100 for every $1 in your account.
Certain brokers – especially unregulated ones (a common feature in Hugo’s Way) – allow leverage of 1:200 or 1:500. It means that for every $1 in a user’s account, these brokers let them trade up to $200 and $500.
Should You Leap into It?
Those who are new to trading cannot understand the nitty-gritty of the trading world. A good thing about Hugo’s Way – like all other good brokers – is that it allows users to create a demo account. If you want to understand the concept of “leverage better,” what you can do is to use your demo account to try out the available options.
It is a good way to “test the waters” and then use your hard-earned money for trading. Understanding the technical know-how of any field is essential, especially when your money is involved. It is good that Hugo’s Way lets you experiment with your options in a convenient manner.
Pros and Cons of Leverage
There are always two sides to a coin. Like all other things, financial leverage comes with its advantages and disadvantages. In this section, we will have a brief look into what are some of the things that will help you when you go with financial leverage and are some of the things that will create difficulties for you in case you go with financial leverage. Let’s take a look:
Pros of Financial Leverage
Small Upfront Investment
Do you know why so many people shy away from the world of stock markets and trading? Because they think that they will lose their money just because of one single mistake. But how will the trading world move if there is no one to invest?
It is the reason why many brokers offer leverage options. Under such financial schemes, investors can invest a relatively smaller amount. However, the gain – if any – will be higher as borrowers will be using their debt to get into the trade.
With more cushion money to explore different options, investors will make sound investment decisions. It doesn’t mean they will not have to pay back the loan. Leverage is a type of loan, and like every other debt, it has to be paid by its conditions. But when investors need a good amount of funds to invest in the trading world, leverage comes to the rescue and plays an important role in building investors’ confidence.
Extra Assets
Imagine an investor who knows that some assets are worth high and will give good returns, but s/he cannot buy those particular assets, mostly because s/he doesn’t have extra cash lying around. But what if they get some money to explore their options? What will happen then?
Such scenarios are what brokers think about regularly. As mentioned above, a buzz-free stock market is not good for anyone – for neither investors nor the economy. And this is why the world of trading has many tools that people can use to get the maximum benefits.
In this scenario, leverage helps investors to expand their asset base easily. Through debt financing, they can widen their portfolio and take more risks.
Higher Returns
As we discussed earlier, your money will grow in most cases – and that’s the beauty of the trading world. But this money will take “ages” – and we are not kidding here – to multiply and show some improvements. On the other hand, if you have the leverage option, you will see that your money is rising exponentially.
So, for better investment options, leveraging is a good option. Also, everyone wants to reap the benefits of the trading world, and there is nothing wrong with tapping on all the available tools.
Cons of Leverage
Yes, we know that there are so many pros of leverage. But, it does have its set of disadvantages. So, when you are entering the finance world, you must analyze both the pros and cons of certain things. Here are some of the disadvantages of this financial tool:
Assets Decline in Value
Some assets are volatile, and they keep losing their value quickly. When your assets’ value declines, you are left with more debt to pay and less gain. It is one of the most serious drawbacks of leverage. It makes you neck-deep in debt for an asset that doesn’t have good net worth – or that has lost its worth over time.
Operational Risks
Leveraging is not feasible for all types of industries. Some sectors – especially oil and gas – may face countless operational risks due to financial leverage.
Running out of Business
The world of trading is a high-risk industry. While there are so many advantages of taking the plunge and investing money to reap good rewards, there are many risks. When you have the option of leverage, you spend more than you can afford.
It is a tricky point to explain. The purpose of leverage is to allow you to spend more than you own. However, investors also have to realize that they have to pay back this debt. Sometimes, businesses – with their aim of getting more returns – pledge more than what they can pay back. And as a result, they reach the verge of bankruptcy. The finance world is riddled with examples of once-thriving businesses that had an unfortunate fall after failing to clear off their debts.
Frequently Asked Questions About Trading With Leverage
Q: How do you trade with leverage?
Ans: There are no technical differences between trading with leverage and without it. All the steps that you follow when you have your money in the account will be followed even when you’re taking leverage debt to trade.
Q: Do you have to settle your leverage debt?
Ans: Of course! Leverage is a form of debt, and like all other debts, it has to be paid in accordance with some agreed-upon terms and conditions. Your broker will set certain guidelines for you that you will have to meet when paying back your debt.
The Final Word
So, what do you think about the thing called financial leverage? It is indeed a great way of increasing your returns without actually putting all your money in one basket. Leveraging allows you to have a safe window of opportunity. But as mentioned above, this opportunity should be explored in a mature and wise manner.
When choosing your broker, ensure that you go with one that offers a demo account. Such options allow you to have a great understanding of how things work and how you will trade your money.
Hugos Way Guide – Read our In-Depth Hugos Way Review
Hugos Way Rating: 5.85 / 10
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