Leverage Management

Leverage Management

Leverage amplifies both gains and losses -- use it responsibly.

Leverage Basics

| Leverage | $1,000 Controls | Exposure | | -------- | ---------------- | -------- | | 1x | $1,000 | None | | 5x | $5,000 | 5x | | 10x | $10,000 | 10x | | 100x | $100,000 | 100x |

Safe Leverage by Volatility

| Volatility Level | Max Leverage | | ---------------------- | ------------ | | Low (Forex majors) | 10-20x | | Medium (Crypto majors) | 3-5x | | High (Altcoins) | 1-2x | | Extreme (Memes) | 1x or none |

Leverage by Trading Style

| Style | Recommended | | ---------------- | ----------------------------- | | Scalping | Can use higher (faster exits) | | Day Trading | 3-10x depending on asset | | Swing Trading | 1-3x (overnight risk) | | Position Trading | 1-2x (long exposure) |

Key Formulas

Effective Leverage: Position Size / Account Equity

Example: $50,000 position on $10,000 equity = 5x effective leverage.

Liquidation Distance: 100% / Leverage

Example: 10x leverage = liquidated at 10% move against position.

Position sizing with leverage: Position Size = (Account x Risk%) / Stop Distance%. Leverage does not change how much you risk -- it changes how much capital you tie up.

Impact of Leverage on Losses

| Leverage | 1% Move Against | Account Impact | | -------- | --------------- | ------------------- | | 1x | -1% | -1% | | 5x | -1% | -5% | | 10x | -1% | -10% | | 100x | -1% | -100% (liquidation) |

Liquidation Awareness

| Leverage | Approx. Liquidation Distance | | -------- | ---------------------------- | | 5x | 20% against | | 10x | 10% against | | 20x | 5% against | | 100x | 1% against |

Always set stops BEFORE the liquidation level.

Workflow

1. Assess volatility of the asset being traded
2. Select max leverage based on volatility table above
3. Calculate effective leverage -- position size / equity
4. Verify liquidation distance -- must be well beyond your stop loss
5. Maintain margin buffer -- keep 50%+ margin ratio at all times
6. Reduce leverage in volatile conditions or after losses

Key Rules

• NEVER risk more than 2% of account even with leverage
• NEVER use max available leverage -- use 50% or less of what the platform offers
• NEVER hold high leverage into major news events or overnight (for day trades)
• Calculate liquidation price before every leveraged entry
• Start with low leverage (2-3x max) and increase only with proven edge
• Reduce leverage after losses -- do not increase it to recover

Related Skills

• position-sizing -- leverage changes capital allocation but not risk amount
• stop-loss-strategies -- stops must be set before liquidation price

Source & license

This open-source skill is cataloged on AgentStack and links to its original source — we do not rehost the code.

• Author: SKE-Labs
• Source: SKE-Labs/agent-trading-skills
• License: Apache-2.0

Install and usage instructions live in the source repository linked above.