After my failed leveraged trade, I finally sat down to calculate—not just “feel”—how much price movement my position could withstand😅.
The formula is simple, but I ignored it for a long time: the distance to liquidation is approximately 100% divided by the leverage. At 3x, that’s about a 33% move against your position; at 10x, just 10%; at 20x, only 5%.
What this means in practice:
— the higher the leverage, the less ordinary market “noise” it takes to wipe you out—and that’s not an anomaly, just normal daily volatility $BTC ;
— position size should be calculated not based on “how much I want to make,” but on how much distance to liquidation you’re actually comfortable with given this asset’s usual price movements;
— maintenance margin matters too—liquidation often happens a little before the theoretical threshold, so you need to leave a buffer rather than cutting it too close.
My simple personal checklist before entering a trade now: what’s the leverage, how far away is liquidation in percentage terms, and can that distance withstand a typical daily move $BTC over the recent period? If the answer is “no,” I reduce the leverage or position size instead of hoping for luck.
This isn’t investment advice—just my calculation😉.
Do you calculate the distance to liquidation, or go by intuition?👇
$BTC #Futures
The formula is simple, but I ignored it for a long time: the distance to liquidation is approximately 100% divided by the leverage. At 3x, that’s about a 33% move against your position; at 10x, just 10%; at 20x, only 5%.
What this means in practice:
— the higher the leverage, the less ordinary market “noise” it takes to wipe you out—and that’s not an anomaly, just normal daily volatility $BTC ;
— position size should be calculated not based on “how much I want to make,” but on how much distance to liquidation you’re actually comfortable with given this asset’s usual price movements;
— maintenance margin matters too—liquidation often happens a little before the theoretical threshold, so you need to leave a buffer rather than cutting it too close.
My simple personal checklist before entering a trade now: what’s the leverage, how far away is liquidation in percentage terms, and can that distance withstand a typical daily move $BTC over the recent period? If the answer is “no,” I reduce the leverage or position size instead of hoping for luck.
This isn’t investment advice—just my calculation😉.
Do you calculate the distance to liquidation, or go by intuition?👇
$BTC #Futures
