My fingers trembled more than those with Parkinson's. This is the huge leverage pit I stepped into 6 years ago, and I still feel heartache thinking about it!
Back then in the digital asset market, Ethereum was still hovering around 3000 units. I was holding my year-end bonus of 2300 units that I had saved for half a year, and my mind was filled with thoughts of 'leveraging 5 times to make quick money to buy my mom a new down jacket.' Looking back now, I was purely a 'novice': I didn’t understand risk control and thought 'the market must rise,' so I went all in with 5 times leverage. As a result, at 2 AM, the market plummeted like a roller coaster to 2700 units, and the moment the system popped up the 'forced liquidation' notification, I stared at the screen in a daze for half a minute, lacking even the strength to curse. My mom's new clothes were gone, and half a year’s hard-earned money was washed away.
After that 'heavy loss,' I spent a week reviewing my trades and came up with three 'leverage survival rules.' Over the past six years, I have relied on them to navigate the market without ever being forced to close my position again. Today, I will share them all with you. Newbies are advised to copy my homework directly!
Rule one: Newbies should not use leverage greater than 3 times, and veterans should stick to a maximum of 2 times! Many people think that the higher the leverage, the more they earn, but this is fundamentally wrong! Leverage is a 'risk amplifier'; 5 times leverage means that if the market moves against you by 20%, you are done. Newbies can hardly control their mindset and are easily led by emotions. I now trade with a fixed 2 times leverage; it seems slow to earn, but it is stable—surviving in the market is more important than making quick money; retaining your capital gives you the chance to turn things around.
Rule two: 8% position rule, write a commitment letter and stick it to the screen! This is my most essential takeaway: regardless of how much capital is in the account, the position for a single leveraged trading instrument must not exceed 8%! For example, in an account of 10,000 units, the maximum investment in a single trade is 800 units, and you must write a 'position commitment letter' in advance—clearly stating the maximum position for the day, stop-loss point, and profit target. Stick it next to your computer screen before the market opens each day. If you don’t do it, penalize yourself by stopping trading for a day or eating instant noodles for three days (I’ve tested that punishing yourself with instant noodles is very effective; it will be remembered for a lifetime). Why 8%? Here’s a simple logic: even if you are unfortunate enough to be forced to close your position, you will only lose 8% of your account; the remaining 92% of the principal will allow you to quickly recover, preventing you from losing everything at once.
Rule three: Stop-loss points must be strictly adhered to; never hold onto losing positions! I've seen too many people fall into this trap! No matter how good the market is, do not adjust your stop-loss. Once the stop-loss point is triggered, close your position immediately, even if the market rises again later, do not regret it. Last year, there was a crazy market surge, and my friend urged me, 'Increase your position to make quick profits; if you miss it, there will be no opportunity,' and said that '8% position is too conservative.' I stared at the position line on the screen and did not move. As a result, the market suddenly retraced that afternoon, and my friend, having added 4 times leverage and fully invested, was directly forced to close his position. Meanwhile, I only lost 5% because my position was light, and I made it back in just a few days. Remember: there will always be opportunities to make money in the market; what is lacking is the mindset to resist temptation.
In fact, leverage itself is not a monster; the mistake is treating it as a 'tool for recovery.' I've seen too many people lose money and then think, 'I'll increase leverage to recover quickly,' only to lose even more. I've also seen people use leverage wisely to amplify their profits and gradually accumulate wealth. The core difference is whether you are controlled by leverage or whether you control leverage. For those who like and follow,
