How much leverage is safe?

There's no fixed number, but the principle is to use effective leverage low enough that a normal move doesn't threaten the account.

Why did I get liquidated even though my long-term direction was right?

Because the position was so large that a short-term adverse move hit the liquidation threshold before the long-term direction played out.

How does margin differ from capital?

Margin is the portion of capital locked to hold the position; if losses eat into the rest to a threshold, you get a margin call.

Leverage and Margin | 2AiTrading

What leverage and margin are

Leverage lets you control a position much larger than the money you put down. Margin is the deposit you must post to open that leveraged position. For example, 1:100 leverage means 1 unit of capital controls 100 units of value, and that capital is the margin.

Why it matters

Leverage amplifies both gains and losses by the same ratio. It's the clearest double-edged sword in trading: used well, it improves capital efficiency; used badly, it blows up the account after a small move. It's the number-one reason beginners in high-leverage markets lose money fast.

Related concepts

Leverage: the ratio between position value and the capital you put down, such as 1:10, 1:100, 1:500.
Margin: the minimum money needed to open and maintain a position.
Margin call: a warning when the account no longer has enough maintenance margin, asking you to add funds or reduce the position.
Liquidation: when equity falls to a threshold, the venue automatically closes the position to protect the rest, usually costing most or all of your margin.

How to apply it

The high leverage a venue allows is not the level you must use. Good risk managers often use far lower effective leverage than the maximum, and always compute the worst-case loss before entering. Think in terms of money you can lose, not money you can make.

A concrete example

A 10 million VND account at 1:100 leverage opens a position worth 500 million. The market only needs to move 2% against you to lose 10 million — the entire capital. With the same account, opening a position worth 50 million means a 2% adverse move loses only 1 million. Leverage isn't dangerous by itself; the danger is opening a position too large for your capital.

Common mistakes

Using maximum leverage because there's "buying power left," turning one bad trade into most of your capital.
Confusing allowed leverage with advisable leverage.
Not computing the worst-case loss if the stop is hit.
Ignoring margin-call warnings, letting the position be auto-closed at the worst level.

FAQ

How much leverage is safe? There's no fixed number, but the principle is to use effective leverage low enough that a normal move doesn't threaten the account.
Why did I get liquidated even though my long-term direction was right? Because the position was so large that a short-term adverse move hit the liquidation threshold before the long-term direction played out.
How does margin differ from capital? Margin is the portion of capital locked to hold the position; if losses eat into the rest to a threshold, you get a margin call.

Checklist

☐ How many times my capital is my position?
☐ If the market moves to my stop, how much money do I lose?
☐ Is that number within my risk limit?
☐ Am I using leverage because I need to, or just because the venue allows it?