1. Definition of leverage
Leverage is the operation of borrowing funds to amplify capital. For example, 10x leverage means that with 1 unit of capital, you can control a position of 10 units, and profits and losses are calculated based on 10 units.
2. Amplification effect of leverage
Profit amplification: If the price rises by 1%, the profit under 10x leverage will be 10%.
Loss amplification: If the price fluctuates in the opposite direction by 1%, the loss will similarly be amplified to 10%.
Risk of liquidation: The higher the leverage, the easier it is to trigger forced liquidation when the price fluctuates in the opposite direction.
3. Misunderstandings about leverage selection
Beginners often pursue high leverage (e.g., 50x, 100x), but high leverage significantly reduces the margin for error and requires high trading skills.
It is recommended that beginners start with low leverage (5x-10x) to gradually adapt to market fluctuations.
2. Core principles of position control
1. Total position ratio
The risk of a single trade should not exceed 1-5% of total funds (e.g., if the account has 10,000 USDT, the maximum loss per trade is 100-500 USDT).
In extreme market conditions, positions should be reduced (e.g., lower leverage or liquidate before a black swan event).
2. Gradual position building and dynamic adjustment
Pyramid adding method: gradually increase positions after confirming a trend, but subsequent positions should be smaller than the previous one (e.g., first position 2%, add 1%).
Inverted pyramid reduction method: take profits in batches after gaining, to prevent profit retracement.
3. The inverse relationship between leverage and position
The higher the leverage, the lower the actual position should be.
Example: If using 20x leverage, it is recommended that the position does not exceed 5% of total funds; if using 5x leverage, the position can be increased to 20%.
4. Setting stop-loss and take-profit
Stop-loss: Set stop-loss points based on technical analysis (support levels, volatility) to avoid emotional holding.
Take-profit: Take profits in stages (e.g., 50% of the position at resistance level, remaining position trailing stop-loss).
5. Volatility matching
High-volatility assets (e.g., altcoins) require lower leverage and position; low-volatility assets (e.g., BTC/ETH) can be moderately increased.
3. Analysis of practical case studies
Scenario: BTC/USDT perpetual contract trading
1. Account funds: 10,000 USDT
2. Strategy:
Risk tolerance: Single trade loss not exceeding 2% (200 USDT)
Leverage selection: 10x
Stop-loss range: 1% (stop-loss triggered when price fluctuates 1% in the opposite direction)
4. Dynamic adjustments:
If profits are gained after floating gains, the stop-loss point and position ratio need to be recalculated to avoid expanding risk exposure.
1. Range market
Reduce leverage (3-5x), shrink position (5-10%), and adopt a high-sell-low-buy strategy.
2. Trend market
Moderately increase leverage (10-20x), position can increase to 20-30%, follow the trend.
3. Extreme conditions
For instance, when the Federal Reserve raises interest rates or exchanges face issues, reduce positions to below 5% or be in cash.
Survival formula for contract trading:
Low leverage + small position + strict stop-loss + emotional control = long-term survival
Always remember: There are always opportunities in the market, but once the principal is completely lost, you will be out of the game.$BTC $ETH #加密市场回调 #币安HODLer空投TREE #以太坊十周年