From TradingView · · 1m 20s
A trader's rules for leveraged positions without blowing up
One trader's systematic approach to building positions with leverage while managing risk and avoiding total account loss.
In brief
One trader's systematic approach to building positions with leverage while managing risk and avoiding total account loss. Split entries into 3-6 stages using only 4% of your account as margin per position, and keep half your account in cash reserve. Originally reported by TradingView.
Use modest leverage always
Stick to 2x-3x leverage on every trade. Build both long and short positions gradually in stages, never all at once.
“Always use 2x, 3x leverage. We build positions in stages, both long and short.”
The 4% margin rule
Risk only 4% of your account as margin per position. Split that into 3-6 separate entries, like $0.5, then $1, then $1.5 on a $100 account.
“Max 4% of your account as margin per position. Split that 4% into 3, 6 entries.”
When to add to positions
Only add to a position when your ROI is above -100%. Wait a few days between additions and sleep on the decision.
“Only add when your ROI is above -100%. Better: wait a few days between add-ons.”
Keep half in cash
Maintain 50% of your account as a cash reserve. Balance your directional bets: 1 long for every 3 shorts in bear markets, reverse in bull markets.
“Keep half your account in cash as a reserve. Balanced.”
Liquidation must be far away
Every position's liquidation level should be at least 10x away from your entry. This protects you from getting wiped out by normal volatility.
“Every position's liq level should be at least 10x away.”
The market wants you to gamble
Doubling your account in a day is possible, but so is losing everything. The market profits when you get greedy and reckless.
“The market is waiting for you to gamble so it can take your money.”
The key point
Split entries into 3-6 stages using only 4% of your account as margin per position, and keep half your account in cash reserve.
