PSA. Don't touch leverage if you dont know the rules.

The rules:

Every trade is a bet on the accuracy of your market judgement and timing. Your stop loss is the window within which you are willing to trust that judgement. When you add leverage, you shrink that window.

The rational response then is to start any consideration of leverage by first deciding on the $ value of your confidence and the range over which that confidence is valid. Those two things will tell you what leverage you think your judgement can handle. Taken together they will also yield the capital amount that needs to be tied up to meet criteria.

Caveats:

- leverage is a borrowed wind and can easily capsize your boat. Stay away if not a degen.

For Degens, gamblers, reprobates and adrenaline Junkies:

- only a tiny percentage of your portfolio should be subject to leverage at any one time.

- stop losses have to be extremely well managed. $ Window of trust remains at whatever the initial trust level was. ie. 100,1000 or 10 dollars at risk at any time. so everytime there is sufficient gain, advance the stop losses. Don't suddenly trust your read more more

- 90% of trading time spent on initial reads and postmortems