$2 (your capital) x 20 (leverage) = $40
This means you can control a position size of up to $40 in a futures trade. Since your capital is very limited, it's crucial to be extremely cautious to avoid losing it due to small price fluctuations. Here's how you should approach it:
How Much to Invest:
Given the small capital, it's wise to avoid using the full leverage amount. Consider investing:
1. Conservative Approach (50% of Leverage):
Invest $20 (using $1 of your own capital and $19 borrowed).
This approach minimizes risk while still utilizing leverage.
2. Moderate Approach (75% of Leverage):
Invest $30 (using $1.50 of your own capital and $28.50 borrowed).
This gives you more exposure but still maintains a buffer.
3. Aggressive Approach (Full Leverage):
Invest the full $40.
This utilizes your entire buying power but significantly increases the risk of losing your entire capital.
Recommendation:
For such a small capital amount, I recommend the conservative approach:
Invest $20, which uses 50% of your maximum buying power.
This way, a 10% loss on your $20 position would result in a $2 loss, which is your full capital. Using the full $40 position would make it easier to hit your stop-loss and lose your capital quickly.
In summary, with $2 capital and 20x leverage, investing $20 in a future trade is a safer option to prevent rapid capital depletion while still utilizing leverage.
