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Derivatives are often leveraged devices, permitting merchants to take bullish (lengthy) or bearish (brief) positions price greater than the quantity they’ve deposited as a margin on the alternate. Leverage is a double-edged sword, magnifying each earnings and losses. It additionally exposes merchants to liquidations, or pressured unwinding, because of margin shortfalls. Moreover, mass liquidations usually result in exaggerated bullish or bearish strikes, so the better the usage of leverage, the upper the likelihood of liquidations injecting volatility into the market.
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