What leverage should I use?

Leverage is just a multiplier. Risk comes from your stop distance and position size. Pick leverage so liquidation is never the thing that exits you.

No signals. No predictions.

Reality check

The right leverage is the one that lets you place your stop at a real invalidation level while keeping liquidation far away. If the only way to "make it work" is higher leverage, your size is too big or your stop is fantasy.

Leverage & sizing

1

Start with invalidation, not leverage

Rule: Define the price where your idea is wrong (the stop).

Why: Leverage chosen first forces a made-up stop later.

Tiny example: If this low breaks, the long is invalid.

2

Decide max loss per trade (account-level)

Rule: Pick a fixed loss limit you can take repeatedly.

Why: Without a loss cap, sizing becomes emotion-driven.

Tiny example: Risk 0.5% of account per trade.

3

Size the position from stop distance

Rule: Wider stop → smaller size. Tighter stop → bigger size.

Why: Stop distance is what converts price movement into PnL.

Tiny example: 2% stop must be ~half the size of a 1% stop (for the same max loss).

4

Choose leverage to keep liquidation irrelevant

Rule: Liquidation should be meaningfully beyond the stop, with room for slippage and spikes.

Why: Liquidation is a forced exit. A plan needs an intentional exit first.

Tiny example: Stop -1.8% but liquidation -2.2% → too close.

5

Sanity-check R:R and fees at that size

Rule: After sizing, the trade still needs acceptable R:R after fees/funding and realistic targets.

Why: A "safe" size that makes the trade not worth taking is still a no.

Tiny example: 1.2R after fees becomes 0.8R → pass.

Why humans fail this

  • Traders pick leverage to chase PnL, then "back into" the stop. The size comes from greed, and the stop gets placed wherever it needs to go to justify that size.
  • A small move feels like a big move because size is too large. When overleveraged, every 0.5% pullback feels like a crisis, leading to panic closes on noise.
  • Liquidation becomes the real stop, so discipline disappears. When liquidation is close, you can't honor your stop anymore — you're stuck hoping price doesn't liquidate you.

Visual proof

Same entry + stop, two leverages

Notice how liquidation distance shrinks dramatically with higher leverage

⚠️ Scenario A: 20x Leverage (Dangerous)
$44,200
$43,200
$42,990
Entry
Stop (Planned)
⚠️ Liquidation (20x)
✅ Scenario B: 5x Leverage (Safe buffer)
$44,200
$43,200
$35,360
Entry
Stop (Planned)
Liquidation (5x)

🔴 Scenario A Problem: Liquidation at $42,990 is only $210 below the $43,200 stop (0.48% gap). Any slippage, spike, or lag means liquidation hits before your stop can execute. You've lost control.

✅ Scenario B Better: Liquidation at $35,360 is $7,840 below the stop (18% gap). Spikes, slippage, and volatility won't threaten liquidation. Your stop remains the intentional exit, as planned.

Validate this in PulseTrader

Enter your entry, stop, and desired risk. PulseTrader computes position size, leverage, and liquidation distance, then flags when liquidation is too close for your timeframe's typical movement.

FAQ

Not directly. Leverage is just a multiplier — it amplifies both gains and losses. The real risk comes from (1) position size relative to your account, and (2) how close liquidation is to your stop. You can use 10x leverage safely if your position size is small and liquidation is far from your stop. Conversely, 2x leverage is dangerous if your position is huge and liquidation is near your stop. Risk = position size + stop distance + liquidation proximity, not leverage alone.

If leverage is the plan, you don't have a plan —
you have a bet.