How to choose the perfect ratio
You must consider both the risks of market volatility as well as your potential profits.
After all, margin is a tool that should be used to increase profits when done right, however, everything should be done in moderation.
When you choose a ratio for crypto you need to consider two things:
- Your time frame
- The volatility of the coin
Once you know your time frame you can use the table above.
The volatility of the coin can easily be measured by using the ATR indicator.
ATR stands for Average True Range.
This indicator will tell you how frequently your coin fluctuates up and down in price and also how much.
This information is essential when choosing the perfect level of leverage for crypto trading since it will tell you how volatile your coin is.
Once you have learned how it works you can apply it to your charting software.
Apply the indicator and set the chart to the 1D time frame.
The 1-day time frame will show you the larger swings which will tell you on average how much the price fluctuates.
The general rule is:
- High ATR reading = Choose a ratio between 1:5 – 1:25
- Medium ATR reading = Choose a ratio between 1:10 – 1:45
- Low ATR reading = Choose a ratio between 1:20 – 1:75
If you want more safety while trading try to lower the ratio another point or two to avoid leverage trading liquidation.