📚 Smart Leverage Trading: How to Use It Without Breaking Your Brain
⚙️ What Is Leverage?
Leverage allows you to open a larger position than your actual capital.
- 5× Leverage: You control $500 with $100 margin.
- 25× Leverage: You control $2,500 with the same $100.
- The higher the leverage, the smaller the price movement needed to liquidate your position.
📊 Real Example: Long Position on BTC
- Entry Price: $60,000
- Leverage: 10×
- Margin Used: $100
- Position Size: $1,000
🎯 Take Profit & Cut Loss Strategy:
| Target | Price | Gain/Loss | Action |
|--------|-------|-----------|--------|
| TP1 | $61,000 | +$166 | Partial close (50%)
| TP2 | $62,000 | +$333 | Full close
| SL | $59,000 | -$166 | Cut loss
> Risk-Reward Ratio: 1:2
> Liquidation Price: ~$54,545 (depends on exchange fees & funding)
🧠 Risk Analysis
- Pros of 10× Leverage:
- Faster gains with small moves.
- Efficient use of capital.
- Cons:
- Small price drops can wipe out margin.
- Emotional stress increases with volatility.
✅ Best Practices for Using Leverage
1. Use Stop Loss & Take Profit — Always set them before entering.
2. Risk Only 1–2% of Total Capital per Trade — Not just margin, but total portfolio.
3. Avoid Overleveraging — 50× or 125× is for scalpers with strict discipline.
4. Trade with a Plan — Entry, exit, and invalidation levels must be clear.
5. Don’t Chase Pumps — Wait for retests or confirmations.
🧮 Margin-Based Position Sizing Table
| Leverage | Margin | Position Size | Liquidation Risk |
| 5× | $100 | $500 | Low
| 10× | $100 | $1,000 | Moderate
| 25× | $100 | $2,500 | High
| 50×+ | $100 | $5,000+ | Very High
