Leverage can amplify gains. The same mechanism amplifies losses just as fast. This guide doesn't tell you what to trade — it gives you a framework for how much to risk, so one bad trade doesn't end your session.

What This Guide Covers

  • How to think about position sizing
  • How to choose the right leverage for where you are as a trader
  • How to use stop losses as the primary risk tool
  • How to manage multiple open positions
  • What to do when a trade goes against you

Before You Start

The Core Principle: Define Your Loss Before You Enter

The most effective risk management happens before a trade opens — not while it's running.

Before you place any trade, answer three questions:

  1. What is the maximum I'm willing to lose on this trade?
  2. Where will I exit if the market goes against me? (your SL price)
  3. Does my position size match those two numbers?

If you can't answer all three before confirming, you're not ready to place the trade.

Position Sizing: Risk a Fixed Amount Per Trade

The most common mistake new traders make isn't choosing the wrong direction — it's risking too much on a single trade.

A practical starting framework: risk no more than 1–2% of your total capital per trade.

If you have $500 in your wallet:

  • 1% risk = willing to lose $5 on this trade
  • 2% risk = willing to lose $10 on this trade

This seems small. That's the point. At 1–2% risk per trade, even a 10-trade losing streak doesn't wipe you out. It leaves you capital to recover and to learn.

How to calculate your position size:

  1. Decide your maximum loss (e.g., $10)
  2. Decide your SL distance — how far from entry before you exit (e.g., 3% below entry)
  3. Work backwards: if a 3% move costs you $10, your notional position size should be ~$333
At 10x leverage with $333 notional: you'd need ~$33 of margin. A 3% adverse move = $10 loss = your risk cap.

Most traders skip this math and just pick a round number for margin. That's how a single trade takes 30–50% of an account.

Leverage: Start Lower Than You Think You Need

Leverage is a dial, not a target. The highest number isn't the right number.

For new traders, start between 5x and 10x.

At 5x leverage:

  • You need a ~17% adverse move to reach liquidation
  • Normal market volatility is unlikely to wipe you out before your SL can execute
  • You have time to monitor and react

At 50x–100x leverage:

  • A 1–2% move can liquidate your position
  • There's almost no room between your SL and your liquidation price
  • One moment of distraction or slippage can cost the full position

Higher leverage is appropriate only when:

  • You have a specific short-term thesis with a very tight entry and defined exit
  • You've traded smaller leverage long enough to understand how the platform behaves under pressure

Don't chase higher leverage because the profit looks more exciting in the order panel. The loss side of that calculation is equally amplified.

Stop Losses: Non-Negotiable for New Traders

Without a stop loss, your only protection is your liquidation price — which means losing approximately 85% of your margin before the position closes.

Every trade should have a stop loss set before you confirm the order.

A few practical guidelines for SL placement:

Give the trade room to breathe. If your SL is 0.5% from entry at 10x leverage, normal market noise will trigger it before your trade has developed. A SL that triggers constantly isn't protecting you — it's just closing positions prematurely at a loss.

Don't set SL too far out either. A wide SL means accepting a large loss if the trade fails. The SL distance should reflect how much you're actually willing to lose — not just whatever keeps the SL away from the current price.

SL must be above your liquidation price (for longs) or below it (for shorts). If it isn't, the position liquidates before the SL can execute. The SL provides zero protection in that case.

See How to Set Stop Loss & Take Profit for full setup instructions.

Managing Multiple Open Positions

As you become more comfortable, you may want to run more than one trade at a time. A few principles:

Track your total exposure, not just individual positions. If you have three long positions open simultaneously and the market pulls back sharply, all three lose at once. Think about your total downside if the market moves against you broadly.

Don't add to a losing position to "average down." This is one of the most reliably damaging habits in leveraged trading. Adding margin to a losing trade does lower your liquidation price temporarily — but it also means you're now risking more capital on a trade that's already proving to be wrong.

Set SL on every position, not just the ones you're watching. Open positions you're not actively monitoring are the most dangerous. A SL on every trade ensures the market can close them for you if you're away.

When a Trade Goes Against You

Every trader loses trades. The question is whether each individual loss is small enough to absorb.

Respect your stop loss. The most destructive habit in trading is moving your SL further away when the market approaches it — extending a losing trade because you don't want to accept the loss. This converts a manageable loss into a much larger one, or a liquidation.

Don't chase a loss with a bigger trade. If a $10 loss feels bad, the instinct is to open a larger position to "win it back quickly." This is how traders lose 10x more than they planned in a single session. Stick to your position sizing rules regardless of recent results.

After a loss, review — don't react. Ask: Did the market invalidate your thesis, or did normal volatility hit your SL? Was your SL placed correctly relative to your liquidation price? The goal is to understand what happened, not to immediately open the next trade to recover.

The Collateral Risk Layer

If you're trading with non-stablecoin collateral (MON or LVMON), there's an additional risk dimension: your collateral can lose value independently of the market you're trading.

If MON falls 10% while you're holding a position open:

  • Your collateral is worth less
  • Your liquidation price moves closer to your entry
  • This happens even if the asset you're trading hasn't moved

If you're new to perp trading, use USDC as collateral until you understand how liquidation works. USDC's value doesn't change — your liquidation price is determined only by the market you're trading, not by two independent price variables.

See How to Use AnyCollateral for a full explanation of collateral types and their risks.

A Simple Risk Checklist for Every Trade

Before confirming any position:

  • I know my maximum loss on this trade (in dollar terms)
  • My SL is set at a price that reflects that loss
  • My SL is above my liquidation price (long) or below it (short)
  • My leverage is appropriate — not the maximum available
  • My position size is consistent with my overall risk cap
  • I can monitor this position or I've set a SL tight enough to protect it while I'm away

Risk Reminder

Risk management doesn't prevent losing trades — no framework does. It prevents any single trade from causing damage you can't recover from. The traders who last are the ones who protect their capital on bad days so they can still trade on good ones.