As already mentioned, trading cryptocurrency with leverage amplifies risk, and should only be considered by experienced traders. Simply applying leverage and letting rip would be extremely reckless. The following basic tactics should be used to mitigate the risk.
Position Sizing
The most important consideration with leverage trading (which applies to trading full stop) is not to put yourself in a position where you can lose a large proportion of your entire trading capital.
Losing large proportions of your trading funds from one failed leveraged trade – say 80% – might make you less inclined to maintain discipline in how you manage the remaining 20%.
Setting a stop-loss
Entering a leveraged trade should be approached in the same way as a regular trade – as outlined earlier in this section. You should have an entry point and exit point based on anticipated gain, but also a point at which you pull the plug and accept your assessment was wrong.
With leveraged trading this is called setting a Stop-Loss, and given the amplified risk is crucial to avoid unrestricted losses. Bear in mind, the ability to trigger a Stop-Loss exactly as required may be dependent on there being enough liquidity in the market.
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