Have you noticed this before? You trade and make money all to know that you later because of that go against your trading strategies which later make you lose?
You can be using just 1x leverage, but you make money to the point that your brain reward center will deceive you and make you increased your leverage and greed, making you risk more but at the end, you are losing.
I think any trader that is making money from trading should be careful of this situation. It will definitely come, but it can be avoided.
What do you think? Has it not happened to you before?
There is a specific temptation when you stick to a single strategy, trade monotonously, and actually make money: you start trading on autopilot. Your brain gets bored and suggests, "Look, you're trading successfully—why not boost your returns using margin?" You look at the charts, see that your trades are solid, and convince yourself that higher leverage won't hurt you. So, you keep raising the leverage and the risk, until eventually, you wipe out your account. I know people this has happened to personally. I’ve dabbled in margin trading myself, and it is an extreme experience.
But I have a rule for this:
5x leverage is the sweet spot; it gives you a safety buffer of about 18.5%.
You *can* use 10x, but only if you are absolutely confident in the trade.
You must always keep some free cash in reserve so that, in a crisis, you can add margin to avoid liquidation.
Alternatively, you can place an order for the same amount just before the liquidation price; this improves your average entry price, lowers the liquidation level, and gives you a bit more breathing room.
But all of this is high-risk and doesn't always pay off.
It’s better to earn a steady profit than to put yourself through that kind of stress!
