Your leverage should come from the coin's daily range, not from how sure you feel.
Thursday's high to Thursday's low:
- $BTC 84,377 to 80,940: -4.07%
- $ZEC 1,337.85 to 1,187.5: -11.24%
Here's a long opened at the high, at three leverage levels, measured at the day's low:
- 1x: BTC -4.07%, ZEC -11.24%
- 5x: BTC -20%, ZEC -56%
- 10x: BTC -41%, ZEC liquidated. The move was bigger than the margin.
Both trades made the same mistake of buying the top tick. On BTC it was a bad day. On ZEC at 10x the position was gone.
The 14-day average daily range is 2.5% for BTC and 9.8% for ZEC, so one normal ZEC day is close to four BTC days. 10x on ZEC swings about like 40x on BTC.
Quick rule: take the leverage you use on BTC and divide it by how many times bigger the coin's daily range is.
What leverage do you use on a coin that moves 10% a day?
Thursday's high to Thursday's low:
- $BTC 84,377 to 80,940: -4.07%
- $ZEC 1,337.85 to 1,187.5: -11.24%
Here's a long opened at the high, at three leverage levels, measured at the day's low:
- 1x: BTC -4.07%, ZEC -11.24%
- 5x: BTC -20%, ZEC -56%
- 10x: BTC -41%, ZEC liquidated. The move was bigger than the margin.
Both trades made the same mistake of buying the top tick. On BTC it was a bad day. On ZEC at 10x the position was gone.
The 14-day average daily range is 2.5% for BTC and 9.8% for ZEC, so one normal ZEC day is close to four BTC days. 10x on ZEC swings about like 40x on BTC.
Quick rule: take the leverage you use on BTC and divide it by how many times bigger the coin's daily range is.
What leverage do you use on a coin that moves 10% a day?