After years of trading derivatives, I’ve noticed a phenomenon: those who get liquidated are never in short supply, but truly unlucky liquidations are actually quite rare. Most of the time, liquidation happens because risk management was not properly implemented.

I’ve compiled some practical methods that are not complicated but can completely change your understanding of leverage trading.

**The first key: High leverage isn’t as terrifying as you think**

100x leverage sounds intimidating, but if you only use 1% of your capital to trade, the actual risk is equivalent to 1% of your full position when buying spot. The formula is simple—actual risk = leverage multiple × proportion of your actual invested position. Master this logic, and high leverage transforms from a beast into a manageable tool.

**The second point: The true meaning of stop-loss**

Many people see stop-loss as losing money, but in reality, it’s like buying insurance for your account. During the market crash in 2024, statistics show that 78% of liquidation cases were due to one reason—losing 5% and still refusing to stop-loss. Industry veterans follow the same iron rule: loss on a single trade should never exceed 2% of the principal. Once this 2% is set, don’t change it; exit when the target is reached.

**The third detail: Position sizing should be scientific**

Here’s a practical formula: maximum investable amount = ( principal × 2%) ÷ ( stop-loss percentage × leverage multiple).

For example—if you have 50,000 yuan, can tolerate a maximum loss of 2%, and use 10x leverage, then you should only invest up to 5,000 yuan. It looks conservative, but this is the foundation for survival.

**The fourth tip: Take profits in batches**

Take one-third of profits when you gain 20%, another third at 50%, and for the remaining part, if the price drops below the 5-day moving average, clear everything. It sounds greedy, but in 2024, some people turned 50,000 into 1 million using this strategy. Systematic profit-taking is far more reliable than going all-in at once.

**The fifth safeguard: Use small money to buy big insurance**

When holding a position, use 1% of your capital to buy a put option, which is like paying a small fee for insurance on your entire position. It can block 80% of sudden risks. During that unexpected crash, many people relied on this move to protect 23% of their principal.

**Finally, do the math**

Whether trading makes money can be directly calculated mathematically: ( probability of winning × average profit per trade) - ( probability of losing × average loss per trade).

Suppose you lose at most 2% each time and take 20% profit when winning, even with only a 34% win rate, the long-term expectation remains positive.

**Four iron rules that must not be broken**

- Single loss capped at 2% of principal
- No more than 20 trading sessions per year
- Profits must be at least three times the losses
- Maintain a 70% watchful stance, only act when opportunities are clear

Trading is most afraid of acting on emotion. Having a plan and following discipline is the only way to sustain profits.