How to Choose the Right Leverage in Crypto Trading: A Practical Beginner’s Guide

In the beginner stage of the crypto world, a common question is: how much “leverage multiple” should I use for trading? Is 10 times better, or is 50 times more exciting? The answer is actually not “the bigger, the better,” but rather “what suits you.” This article will help you understand how to choose the appropriate Leverage Multiple, hoping you can avoid pitfalls and grow more.

Why does the leverage multiplier look very attractive?

Platform advertisements often emphasize phrases like “up to 100 times” and “leverage funds by 1000 times.” This creates the impression that with a small amount of capital, one can achieve significant returns, seemingly guaranteeing profits. For Newbies, this logic of “maximizing potential with minimal investment” is highly attractive. However, the issue is that market fluctuations are uncertain, and leverage merely amplifies the results—both positive and negative.

Opportunities and Pitfalls of Leverage Multiples from Real Cases

Recently, the encryption market experienced massive liquidations: nearly $19 billion in liquidations occurred within a single day. Data shows: “The average leverage ratio for retail investors soared to 10 times, and the overall market leverage ratio reached a new high.”

In other words, many people are not using 100 times leverage, and even the “seemingly low” 10 times leverage can already bring significant risks. Another source points out: when you open a position with 10 times leverage, your maximum allowable loss is about 10%. So, don’t be intimidated by “multipliers” and don’t be misled by “high multipliers.” The key is to clarify: what kind of fluctuations can your funds withstand? Where is your stop loss set?

Additionally, some traders engaged in typical high-leverage operations: conducting swing trades with 10x or even 40x leverage, resulting in drastic changes in “floating profits and losses.” These cases tell us: opportunities exist, but if leverage is not controlled properly, one could lose everything in an instant.

Recommended leverage range for newbies and the reasons

For newbies who have just entered the market, I suggest considering the following ranges: 2-5 times is preferred; 5-10 times for advanced attempts; and over 10 times should be approached with caution. The reasons are as follows:

• Within the range of 3-10 times, it can improve capital efficiency without facing liquidation due to slight price fluctuations.
• The lower the leverage multiple, the greater the buffer space you have to withstand price reversals.
• Newbies often overlook issues like market slippage, trading platform rules, and execution delays. Low leverage can give you time and space to correct operations.

Therefore, if you are a Newbie, it is recommended to start with 2-5 times, familiarize yourself with the platform rules, understand the stop-loss mechanism, and practice position management before considering increasing the multiple.

Tips for Operation: How to Increase Winning Rate with Leverage Multiplier

• Set a stop-loss first: Decide in advance how much you can afford to lose at most before opening a position, and don’t think about it afterwards.
• Determine position size: Use a fixed percentage of funds, such as only using 5-10% of total funds for a single trade. This way, even if there are losses, it will not affect the overall.
• Avoid chasing high multiples: When the market is rising sharply and you see the temptation of “highest multiples,” you should be cautious instead. High multiples are easily influenced by emotions.
• Monitor the market environment: if the recent encryption market is volatile due to policy risks, a wave of liquidations, or technical failures (such as a certain stablecoin decoupling), consider reducing leverage.
• Practice a stable mindset: When trading with leverage, you must accept the fact that “profits are amplified, and losses are also amplified.” Your mindset should be steady when entering the market, and you shouldn’t gamble everything on a single bet.

Common Misunderstandings and Revealing the Underlying Logic

Myth 1: The higher the multiplier, the more money you make.
Reality: A higher multiplier means the margin of loss you can tolerate is lower. For example, 20 times means that a 5% reverse in price could lead to liquidation.

Misconception 2: Only look at the multiples, not the market environment.
Reality: Even with a low multiplier, liquidation may occur in extreme market conditions, such as liquidity exhaustion, technical failures, or sudden policy changes.

Myth 3: Newbies just follow others using high multiples.
Reality: You don’t know whether others have deep experience, funds, and risk tolerance. Newbies following the trend with high leverage are the typical “jump in only to find out how deep the water is.”

Underlying logic: The leverage multiplier actually amplifies your “loss-bearing capacity”. The key is not how much capital you can leverage, but how much loss you can endure. Understanding this logic allows you to read the true risks and opportunities from the term “multiplier”.

Conclusion

In the world of cryptocurrency trading, “leverage multiplier” seems cool, but it actually tests your risk awareness, money management, and mindset. As a Newbie, choosing the right multiplier is far more important than pursuing a high multiplier. It is recommended to start with a low multiplier, steadily build your foundation, and only consider increasing it after gaining a thorough understanding of the market mechanisms. Remember: a higher multiplier is not necessarily better, but the multiplier you choose should be more suitable for you.