Recently a friend DM'd me asking: What exactly is leverage? How do you use it without getting wrecked?

Simply put, leverage is like a magnifying glass in your hand—use it well, and it can amplify opportunities; use it poorly, and your losses will be multiplied as well. The market never shows mercy.

Want leverage to actually help you? Burn these tips into your mind:

**Start with low leverage, don’t go all-in for the thrill right away**
For beginners, 1-5x leverage is more than enough. You might earn slower, but at least you’ll survive longer in the market. Think 5x leverage isn’t high? Wait until you see the price swing 20%—then you’ll know what a real adrenaline rush feels like. Even pros rarely go above 10x, because they know that real skill is in strategy and risk management, not in gambling with your life. Once you go above 20x? You’re pretty much betting your entire fortune at the casino.

**Don’t go all-in on one position; diversification is key**
Never open a single position with more than 5%-10% of your total funds. If you have $10,000 in your account, then put in a maximum of $500 per trade, or be even more conservative and use just $100-$200. The higher the leverage, the smaller your position should be—if you’re using 10x leverage, your position size should be half of what you’d use at 5x, so you have a way out if things go south.

**Stop-loss is your lifeline**
Opening a position without a stop-loss? You’ll regret it sooner or later. No matter how confident you are in the market, your stop-loss should be set based on your own risk tolerance and technical analysis. Take your losses and move on; don’t fantasize about “holding until it comes back,” and never move your stop-loss further away—that’s how disasters start.

**Go with the trend; don’t fight the market**
Leverage works best in clear trending markets. Chasing the highs and lows with leverage during sideways markets? You’re basically asking to get slapped by the market. Just because the market drops doesn’t mean it’ll bounce back, and just because it rises doesn’t mean it’s peaked. The market has its own rhythm—all you need to do is follow its direction, not try to outsmart it by picking tops and bottoms.

**Keep your emotions in check; don’t let greed cloud your judgment**
Leverage is a tool to use your capital more efficiently, not a shortcut to overnight riches. Set a reasonable profit target, and once you reach it, consider taking profits—don’t always think you can squeeze out more from the next move. The purpose of leverage is to amplify your gains while keeping risk under control, not to turn yourself into a gambler.

Manage your risk, keep your emotions steady, and leverage can truly become a weapon in your hands—not a knife that cuts you.