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🔴 Simple Risk Management Strategy for Futures Trading 🔴
Let's say you have 100 USD to trade with.
1. Position Sizing with Leverage:
The entire position with leverage should not exceed 100 USD. Using 50x leverage means your margin should be no more than 2 USD. This makes your whole position up to 100 USD, ensuring no liquidation point since the position is within your total funds.
2. Why and When to Use Leverage:
Using 5x leverage vs. 50x leverage means you are being lent 5 times your money vs. 50 times.
Higher leverage increases risk; trading with a position larger than your funds introduces a liquidation point. Without exceeding your funds, you can avoid liquidation.
3. Example:
Open a position with a 1 USD margin and 50x leverage, making the whole position 50 USD. If the chosen crypto moves up 1%, you've gained 50% on your margin (0.50 USD).A 10% move results in a 500% gain on your margin (5 USD on your 1 USD margin).
🔴 Key Points:
Always keep your leveraged position within the total amount of funds to avoid liquidation. Leverage allows for greater potential returns but increases risk, so use it wisely. Manage positions and leverage to ensure you're trading safely and effectively.