Leveraged trading is a "double-edged sword”, which can amplify gains when used well, but operational errors can also accelerate losses. The following are some techniques for using leverage to make effective investments. They are divided into three parts: Basic principles, risk management, and strategy application to help you improve your success rate while controlling risks.： --- ###**1. Basic principles of leveraged trading** 1. **Understand the nature of leverage** Leverage is the exposure of principal to asset price fluctuations through the borrowing of funds (or derivatives). For example, 10 times leverage means that the price fluctuates by 1%, and your profit and loss fluctuate by 10%. **Leverage will not change the direction of the market, but will exponentially amplify the result of your right or wrong judgment. 2. **Clear applicable scenarios** Leverage is most suitable for **High certainty, short-term opportunities** (such as trend breakthroughs, arbitrage space), rather than long-term holdings. Long-term use of leverage will face risks such as interest costs and unexpected market fluctuations. 3. **Choose a target with high liquidity** Avoid using leverage on niche assets (such as low-market-capitalization currencies, unpopular stocks). Illiquid targets are prone to manipulation or extreme volatility, leading to a sharp increase in the risk of bursting positions. --- ###**2. Risk management: survival is the first priority** 1. **Control the position: always keep a reserve fund** -It is recommended that the position of a single leveraged transaction does not exceed **5%-10% of the total capital** (for example, under 10 times leverage, a 5% position is equivalent to 50% principal exposure). - Reserve at least 30% of the funds as a margin buffer to avoid forced liquidation due to short-term market fluctuations. 2. **Strictly set stop loss and take profit** -**Stop loss line**: Set according to the underlying volatility, for example, the price retracement is 3% (corresponding to 30% principal loss under 10 times leverage). -**Dynamic take profit**: Gradually move up the stop loss level after making a profit to lock in profits (for example, for every 5% increase in the price, the stop loss line is adjusted by 3%). 3. **Avoid the "replenishment trap”** Don't blindly make margin calls to amortize costs when you lose money, unless there is clear evidence that the original judgment logic has not changed and the market is extremely wrong. 4. **Disperse the direction of leverage** If you conduct multiple leveraged transactions at the same time, try to choose different assets or hedged positions (such as going long on gold and short on the US dollar at the same time) to reduce systemic risks. --- ###**3. Strategy application: Techniques to improve winning rate** 1. **Trend following strategy** -**Applicable scenarios**: A clear upward/downward trend (such as breaking through key resistance levels, moving average bulls are arranged). -**Operation**: When entering the early stage of the trend, the leverage can be appropriately increased (such as 5-10 times), but a stop loss close to the trend line needs to be set. -**Case **: After Bitcoin breaks through the previous high, in line with the enlargement of trading volume, leverage can be used to take advantage of the trend to go long, and the stop loss is set at 3% below the previous high. 2. **Volatility arbitrage strategy** -**Applicable scenario**: Market panic leads to abnormal volatility (when the implied volatility of options is much higher than the historical volatility). -**Operation**: Short volatility through option combinations (such as selling straddle options) and use leverage to amplify gains. Pay attention to the risk of black swan. 3. **Hedge leverage risk** -Hedging with derivatives: For example, when going long on stocks, buy put options or short stock index futures at the same time to reduce systemic risk. -Cross-market hedging: For example, while going long on crude oil futures, short energy stocks to avoid single market risks. 4. **Take advantage of market sentiment extremes** When the market is extremely greedy (such as a record high leverage usage rate) or panicked (financing interest rates are negative), the winning rate of reverse leverage operations is higher, but you need to wait for a clear reversal signal. --- ###**4. Psychological and instrumental preparation** 1. **Simulation disk verification strategy** First use a demo account to test the leverage strategy, record the profit-loss ratio, win rate, maximum drawdown and other data, and then invest real money after optimization. 2. **Choose a platform with low friction cost** The interest and handling fees of leveraged trading will erode profits, and trading platforms with low capital rates and small slippage will be preferred. 3. **Maintain absolute discipline** Leverage will amplify greed and fear, and preset stop loss/take profit rules need to be strictly implemented to avoid "carrying orders” or "frequent operations”. --- ###**Important reminder** -**Leverage is a tool, not a shortcut to wealth**: Statistics show that more than 80% of retail leveraged traders end up losing money. - **Novices recommend starting with low leverage (2-3 times)** and gradually accumulating experience. -**Never bet on all your net worth**, leveraged funds must be the part that can bear the loss. The core of leveraged trading lies in the fine-grained control of the risk-reward ratio. There is never a shortage of opportunities in the market, what is lacking is the ability to continue to survive. It is recommended to formulate a detailed trading plan based on one's own risk tolerance and adhere to its implementation.