This tutorial on the top 20 leverage trading strategies is going to be an article for those of you who already know how to trade with leverage and want to improve your results by learning new skills.
Let’s face it, we all use leverage to make more money and sometimes also to make more money faster.
There is nothing wrong with that, in fact, I highly recommend short-term to add leverage little by little to improve profitable the results of trades.
Sometimes it can be difficult to find an angle of how to approach the market and how to find good trades.
We have all been stuck in a traders block where it seems like no matter what we do we can’t get those good trades that generate real hard cash.
Today I will teach you some of the most effective leverage trading strategies that I use when I trade my own money.
These strategies will go hand-in-hand with your approach and you should use them as a complement to your ideas.
I highly recommend that you read through them all as I think that strategy number 9 of the first part helped me most in situations when I felt a little bit hopeless.
It’s more of a mindset when it comes to trading and not so much a strategy but only keeping it in mind will instantly give you a different view.
Leverage trading strategies explained
A trading strategy in a leveraged market is an idea and a way of executing your trades in a matter where you tilt the probabilities in your favor.
It is one of the most important components of a trader’s success and without a proper system and a good framework, you will be stuck in the beginners’ pit for years to come. If you are serious about your investments and want to make real money, at the end of the day, you will have to develop a rigid strategy to win.
Most retail traders think that a strategy is built up of difficult mathematical assumptions and hard-to-grasp indicators that only a math Ph.D. can understand.
That is completely wrong and I will explain to you why.
Strategies are not only about how and where to enter your chosen market, strategies in leveraged trading are about your approach in general.
Markets behave in different ways and the only way to truly understand the currency pair you are actively trading is by following it for a long time and developing principles that later become your strategies.
A strategy is nothing more than a set of rules and your favorite ways to trade a market that you have familiarized yourself with over several weeks or months.
The best traders I know only trade one market and they do it well.
This should give you some hope knowing that it only takes one market and a good strategy to make thousands of dollars.
Why strategies are important in leverage trading
Leveraged trading strategies are important for traders to focus their investment activities around certain opportunities that will, in most cases, generate a profit.
Without a strategy, you are shooting in the dark, and you are going to miss.
I remember clearly when I first started to understand how important it was to have a solid view of how to approach trading. I completely changed my mindset and I started to make better results.
I didn’t go from zero to hero, but for sure, my results went from negative to positive at the end of the month.
The reason I was able to turn my trades around was because of how I looked at the playing field.
Instead of acting ruthlessly at every opportunity, throwing my money into the markets without assessing the situation properly, I became an analyst who scouted the right opportunity.
My trading strategies led me to only take the best setups after I had checked every point on my list, and then I pulled the trigger.
1. Momentum trading
Momentum is one of the most crucial aspects of using leverage to your advantage.
Some of my best trades have been with either positive or negative momentum where the market kept going in the same direction for a few hours up to a few days.
The reason why momentum is so good is because once you get on the right side of the trade you will never have to look back.
You are instantly in the green and you can raise your stop-loss order to break even and from there it’s smooth sailing.
If you are used to taking trades in a choppy market that feels “safer” you have probably been stopped out on countless occasions thinking “What is wrong with my trading?”.
This is because you didn’t trade the momentum.
Once you find the momentum you will realize the potential of leverage and your results will improve as long as you are on the right side.
The best way to find momentum is to learn to trade breakouts.
Breakouts either up or down provide the best momentum in any market because it is followed by a series of stop-losses getting triggered and a bunch of hungry traders jumping on the train.
None can tell for how long the momentum will last but as long as you catch the trade you are most certainly going to cash in.
If you catch a good momentum trade early you can without a doubt make your monthly living with only a few trades per month.
2. Short-sell support levels
This strategy goes hand in hand with the previous point.
Short-selling support lines can create massive momentum because it creates a huge shift in the sentiment of the market.
Many traders rely upon and trust support lines but once they break, they break hard.
The bigger the support level the bigger the move.
Since leverage is all about getting on the right side of the trade as soon as possible and maximizing the potential of the buying power, broken support levels make for some of the best opportunities.
The reason why they are so effective comes down to the shift in sentiment.
Image the number of traders that were heavily long above or at the support line.
All of them fear that the prices will fall below their feet stopping them out.
So, when it happens there is a domino effect of triggered stop-loss orders that become market sell orders and the push-down continues.
It might take you a couple of tries before you hit the right entry but with the correct stop loss and some patience, you can make good money.
Now, start looking for a “trusted” support level and wait for it to break.
If it doesn’t break, no problem, there will always be another support level.
Related: How does short selling with leverage work?
3. Learn one market at a time
This leverage trading strategy is very effective.
When I first started out more than a decade ago I was stuck jumping from market to market looking for opportunities and sadly enough, profits.
This didn’t work and it will probably not work for you either.
The reason why jumping between different currency pairs or stocks doesn’t work is that you don’t learn the behavior of either one.
The better choice is to stick to one forex pair and learn how it moves and how it behaves.
Once you have a good understanding of the most important behavior you can start to pull out the best setups and opportunities.
Now, after you have found the best setups according to your analysis it’s time to go to work.
By only entering the market in the setups you have written down you increase the probability of success by miles.
This is because you understand why you are entering and you have a higher chance of predicting the market.
Do this and repeat and you should see quick results once you have found the top setups.
4. The 1% rule
If you haven’t heard of the 1% rule I am sure you have lost a lot of unnecessary capital.
The 1% rule says that you should only lose 1% of your total risk capital in any given trade.
For example, if you have a total account size of $1000, your 1% loss would be $10.
If you enter the market with $200, $500, or even the whole $1000, your 1% loss will remain the same.
Why is this so effective and why do so many traders use it?
The reason why it is so effective is that if you only lose 1% of your entire stake on any given trade, you will survive many losses before you run out of capital.
Think about it. If you used a different rule that allowed you to lose 20% on each trade, you would lose all your capital if you made a series of 5 losses in a row.
Is it possible to lose more than you invest with leverage?
Yes, it is, but with the 1% rule, you can withstand 100 losses in a row before you go broke.
Now, the good thing with leverage is that you can increase your position size a lot while still keeping the 1% risk.
When you keep your losses controlled and low it’s only a matter of time before you hit a big trade that gives back all your losses and more.
This is how profitable traders stay in the game while testing their setups
Adopt this strategy and you will see how your losses change completely.
This also improves your at the end of the month results by reducing your overall loss profile.
In my opinion, it is one of the top risk management techniques.
5. Use smart stop-losses
A smart stop-loss is a thought-out stop-loss that is not at any risk of getting hunted by algorithms and random market swings.
BYDFi offers this setting, which is one of the top us crypto exchanges with leverage.
Let me explain further what I mean.
You should always choose your stop-loss according to the volatility.
If you are experiencing high volatility then you have to use a wide stop and when the volatility shrinks you are allowed to tighten your stop loss.
This is something that not many traders appreciate and they keep the same distance to their stop loss at all times.
This is a big mistake that will cost you a lot of money on nearly 50% of the trades.
If you randomly choose an arbitrage number for your stop loss, let’s say 50 pips or 0.75% you are going to end up getting eaten by the volatility on days when the swings are bigger than average.
You will only be safe on days that the volatility is low and on some days you might even use a protective stop that is too wide and you are not maximizing your potential.
Use an indicator such as Average True Range (ATR) to calculate the daily volatility and then set your stop-loss accordingly.
This will save you a lot of capital and maximize your potential for leveraged trades.
6. Breakouts pays the bills
Breakouts are by far the most profitable and fun setups where day trading with leverage is very effective.
When talking about momentum trades, breakouts are at the top of the hierarchy and if you master this strategy you will not have to do anything else as a trader.
The reason why a breakout is so sought-after is due to how the probabilities work and the risk-reward ratio.
Try our risk to reward calculator to see if your setup has a risk reward ratio of at least 2.
When you enter a breakout just at the time of the break or a little bit after, your risk-reward ratio can be skewed more than 1 to 200.
This means that you can enter hard and very heavy.
With such a skewed ratio you pretty much have no risk and a mountain of upside potential.
This is how the best traders make the most money either in forex or stock trading with leverage.
Once you recognize a true breakout you can be sure that it’s not going to come falling back to you and trigger your protective stop.
This would be a fakeout, something that frequently occurs in the marketplace.
A fakeout is a breakout that quickly turns back into the range only to lure traders to take the bait.
It takes time to learn how to spot a true breakout but I can give you some helpful tips.
A true breakout takes time to develop, the longer the market has been in a range the better it is.
The volatility always shrinks before a real break and it’s almost as if the trading activity disappears.
It’s called the calm before the storm.
Now that you have learned to locate true breakouts, remember to keep your protective stops very tight and load up on volume as much as you can while staying within the 1% rule.
I have had trades where my stop loss has been as close as 0.01% from my entry while entering with more than 100x leverage.
Those are the trades that can make you rich, or at least pay the bills.
7. Avoid news and stick to your setups
News stories never tell you anything that you don’t already know by looking at a chart.
If you read about it in the news or hear it on the TV, it’s already over and there is nothing you can do about it.
You missed the train.
I have never heard any trader say the following: “I heard on the news that there was an upcoming breakout in Tesla so I bought some and made $2000”.
What you hear is more like: “Tesla surged 15% into new all-time highs this afternoon after Elon Musk acquired company X for their next moon landing”.
In that case, it is already over and the only ones who made money on that trade were the investors who bought Tesla the last year.
So, what should you do instead?
Ignore the news and focus on your own setups.
It is your setups that are going to give you an edge simply because they are studies of the behavior that you have analyzed and written down.
Your setups will be valid in a live scenario and you will always be the first one to enter if you follow a good strategy.
Your own setups also speak to you more than any other story might and they give you the correct information that you need to hear.
Your next step is to start writing down your setups and follow the religiously.
8. Increase leverage on winning trades
This is a big one, I can tell you that.
If you want to learn how professional traders make their biggest wins you better read this one.
Leverage is a powerful tool that can increase your winnings if you are smart or destroy you if you are ruthless.
Many novice traders use the same leverage for all their trades, no matter the situation.
This is completely wrong.
You should play around and adjust your leverage as you trade.
Depending on your entry price and the setup you are in you should use leverage ratios from 1:5 up to 1:100 on certain occasions.
The best traders push the leverage meter once they find themselves in a profitable situation.
These situations, or setups, don’t come frequently but when they do you need to be ready to press down on the gas peddle.
If you could grade your setups from 1 to 10 where 1 is the worst possible situation and 10 is a monster winner with nearly no risk you want to increase your leverage on any trade that is an 8 or better.
If you find yourself in an 8 you should quickly realize that it is time to load up on the gunpowder and hit it large.
This might not succeed every time and that is important to realize because you still want to be within the range of your 1% rule.
However, when you scout an 8 and you truly push it, you are going to make windfall profits.
This is how large professional traders make the most money.
9. Learn the 80/20 rule
As mentioned in the introduction, this strategy is more of a mindset but it carries a lot of wisdom for any trader.
The 80/20 rule basically says that as a trader, you are going to make 80% of your money on 20% of your trades.
Think about that for a second and let it sink in.
20% of your trades will generate 80% of your profits, how is that even possible?
It is very much possible and I will explain how it works.
Trading is very random and so are the results you make on any given month.
It is not a steady nine-to-five work where you get the same paycheck every month.
The 80/20 rule relies on you as a trader to push your biggest winners to the max, that’s it.
It means that when you find a setup that is an 8, a 9, or perhaps a number 10, you need to hit the market with some juice.
When this trade succeeds you will make more money on that single trade than you have made on the previous 10 winners.
That’s what a sequence of trades looks like for a pro.
Your trading result should look something like this:
- small win
- small loss
- HUGE win
- medium win
- small loss
- small win
- small loss
- HUGE win
- small loss
- Small win
Those are 10 trades where two of them are huge wins.
When you look at it from above it is clear that no other trade matters, except for the huge wins.
Those are the trades you wait for and hit them hard when they come.
10. Write down your setups
The last general leverage trading strategy is to write down your setups on a piece of paper or on your computer.
The reason why this is so effective is that you internalize the setup and you remember the build-up for the next time it occurs in the market.
If you have a notebook of 3-6 solid setups where you describe how the market behaved before you entered you will be much more effective in scouting that setup.
As you write them down you will passively view the market with your setups in the back of your mind.
As soon as you find one of your written-down setups you are ready to enter and you know exactly what to do.
The better you are at writing down the sequence from before to end the better you will be at discovering it in a live scenario.
Remember to go back to your notebook and make adjustments if you find ways to improve and also to keep things fresh in your head.
Mike Bellafiore wrote a book on the topic of creating a Playbook where you write down all your best setups to improve as a trader.
I recommend that you read the book if you feel that this could improve your results as a day trader.
High Leverage Trading Strategies For Increased Profit
A high leverage trading strategy is slightly different from a standard trading strategy and in this guide, I will break down the most fundamental parts of how trading with leverage on a high ratio.
Whether you are a complete beginner investor or an experienced scalper, this tutorial will benefit you if you consider trading high leverage in crypto, forex, or stocks.
When using borrowed funds, especially with up to 100x leverage ratios, it is essential to consider both your upside and downside while trading to maximize your output and minimize the damage of a large position in the event of a loss.
As you will see, some of these strategies are directly focused on the entry, your stop-loss level, and the amount of margin capital you put in as your initial investment.
Personally, strategy number 8 has generated the most profit in my account over the years and I recommend you read this one if you know how to do proper risk management and are only lacking an aggressive strategy to increase winners.
When you look at spot trading vs leverage trading there is a difference in the size of the positions and today we will go through the most important factors to consider when using a high ratio.
How to trade with high leverage?
This is an interesting topic that most new traders have stumbled upon some time and wondered, what is high margin in trading?
It is a way of speculating the markets (forex, crypto, and stocks) with high ratios of up to 100x or even 500x margin to increase position sizes to increase returns.
Most beginner investors use high ratios to compensate for a small account size.
This is understandable since it is very difficult, nearly impossible, to make a living with an account that is smaller than a few thousand dollars or euros.
This is why traders leveraged up their position sizes to be able to trade with the same size as professionals.
This of course requires proper planning and preparation and without some decent training under the belt, it is going to be very difficult to succeed no matter how big your position sizes are.
So, the recipe for success starts with a couple of great strategies so in this next chapter I will share with you my favorite strategies I have learned through the years.
High leverage in long-term investing should never be attempted since the fees are too high and the overall success rate of your investments will fall to near 0.
Top 10 high leverage trading strategies
Now, a good strategy is something you want to implement slowly and methodically, you don’t want to rush things down and chase profits without testing out the waters.
Should you be a complete beginner, I highly recommend you try these strategies out on a demo account where you can trade completely without risking your capital.
Remember to balance your trading approach with both risk management strategies and aggressive planning for the best results. As they say in sports, the best offense is a great defense. This holds true in trading and investing as well.
The reason why brokers offer high leverage to beginners is of course to make more money but if you are smart you can take home larger gains than the broker itself.
It’s common knowledge that margin affects profits, it’s your job as a trader to use it to your advantage.
1. Focus on trending markets
The first strategy I want to talk about is how you pick your market.
When using a ratio of up to 100x or more, you need to focus on a market that is currently in a strong positive or negative trend.
Why is this you may ask? Can’t I trade whichever market environment I want and use my standard setups?
Yes, you can. However, when using high credit in forex, crypto, or stock trading, you are always better off entering a heavily one-sided market.
Here is why.
A one-sided market is less prone to throw you out of your position, has fewer fakeouts (fake breakouts), will show you a profit faster, and you have a higher probability of being right at the time of your entry.
The last part of that sentence is the most important for a trader, the entry.
When you enter your currency pair or your leveraged altcoin pair, you need to focus on your entry above all else.
This is important because, with a high ratio, the distance to your liquidation price distance will be very close so you can’t afford to enter over and over again only to be thrown out.
This is a typical pattern I see among beginner traders, they focus on a range-bound market because it seems safer, only to get stopped on 80% of their trades.
Take a look at the screenshot of a trending day in the BTCUSD pair:
All of these arrows are entries that would yield an instant profit upon entry.
They are all short-term trades but the important factor here is that you can raise your stop-loss to breakeven immediately.
Now, look for these kinds of days when you are actively trading on margin and enter with confidence.
The best way to fix this is to practice by looking for a trending forex pair, stock, or cryptocurrency and aim to enter with the trend.
Further down in this guide, I will describe range-bound days as an example of when not to enter.
2. Pick a low-spread broker
Here is a great strategy that will save you a ton of money in the long run and it has to do with the leverage trading fees and commissions you will pay through the spread on your broker.
How is this an important strategy that you need to make a living?
Ok, when you enter and exit the market several times per day as an active day trader you are going to pay the entry fee when you open and close your position.
Also, the spread fee is going to be proportional to your position size, and since you are trading on margin, your position size increases.
This will cause you to pay increased fees daily.
It makes a difference whether you are paying 0.05% commissions or 0.15%.
Let’s take the example of a trader who deposits $1000 in his account as collateral and uses 100x more capital to trade.
He is now able to open a position worth $100.000, let’s calculate how much he needs to pay in fees each time he opens or closes this position with a 0.05% and a 0.15% commission rate.
$100.000 x 0.0005% = $50
$100.000 x 0.0015% = $150
So, with the fee of 0.05% the trader pays $50 each time he opens and closes the $100.000 lot, and with the 0.15%, he pays $150.
That is a huge difference considering that the account size is only $1000.
If he chooses to go with the more expensive broker he can only afford 3 trades before he goes broke but with the cheaper broker, he can afford 10 trades before he is out of money.
It is possible to have 3 losing trades in a row but if your setups are solid you should not experience more than 6 losing trades in a row in a trending market.
So, when you look for your next broker or trading platform, choose the one with the lowest spread or commission.
3. Enter fast and exit fast
If you are having problems with keeping your profits as you are leveraging your contracts, it is probably because of your long holding times.
This kind of trading is a very fast-paced sport and if you are holding your positions longer than a couple of minutes, you are doing it wrong.
First of all, leveraged products are not only heavily day trading oriented, they are short-term oriented as well which means that you should optimize your strategies to fit a very small timeframe.
But why is this?
Why can’t we hold a leveraged position longer than a few minutes, hours, or even a day?
The first reason why you don’t want to hold a margin position overnight is due to the management fee.
The management fee is an interest payment that you pay for using borrowed money.
In the same way that you would pay a car loan or a mortgage on your house, the bank wants its money.
If we close all positions before the end of the day, we get rid of this fee completely which can be pretty big depending on your ratio of borrowed funds.
Secondly, a leveraged position swings in and out of profit very rapidly and you can get knocked out in a matter of seconds.
That is why whenever you are in a profitable position, raise your stop-loss to breakeven as soon as you can and they keep raising it as the market goes higher.
Should the market make a big jump and give you an early big profit, close the position and take the money.
In the case of highly borrowed contracts, you can make several thousand dollars in less than 30 minutes if you time the market correctly, especially if you are trading cryptocurrencies.
Let’s say that you deposit $2000 in your account and use 125x more capital. This will give you a maximum position size of $250.000.
Now, if you trade a cryptocurrency that is about to make a big breakout you could make between 5-10% in less than 30 minutes.
A 5% profit on $250.000 is $12.500. That is not something you want to throw away and wait for a bigger move, close out the position, and look for the next trade.
The same goes for those who only can afford to deposit $200. A 5% gain with 125x leverage would be $1250, that’s a fantastic result for a trading day.
4. Add your stop-loss order before you enter
Here is another strategy that most beginners do wrong which causes many unwanted liquidations due to high leverage.
If you are new to trading with borrowed funds you really need to pay attention to this part.
Before you enter any position, always add your stop-loss order, period.
Why is this important?
This is important for one single reason, volatility.
Market volatility combined with a high ratio can easily liquidate your whole account in a matter of seconds if you are not careful.
I lost a lot of money in my early days just by using proper risk management.
What could happen is that as soon as your press the buy button the market starts falling.
If you are lucky, the market returns fast to your entry price, and no harm is done, however, sometimes the market keeps falling, and falling.
A falling market without a stop-loss order, is doomed to fail.
I’m not saying that this will happen every time you open a position, on the contrary, your position might result in a super quick profit.
However, as traders, we always want to watch out for those worst-case scenarios.
This is why we always make sure that our positions are properly secured, the same way that you would put on your seatbelt when you get into a car.
If you follow this advice I promise you that you will save a lot of money and stress simply by removing easy errors in your investing.
5. Avoid rang-bound markets
I have touched upon this topic in the first strategy but I want to explain further the concept of why you need to avoid a range-bound market.
A range-bound market is a forex pair, a stock, or a cryptocurrency that is currently traded in a tight trading range.
How is this bad for a trader that is using borrowed funds and why should we avoid it?
Here is the thing.
A range-bound market is going to chop up and down all the time without any directional movements.
It will jump up a few pips or points only to turn back to the same price and start chopping to the downside, and then the cycle repeats.
What will happen here is that when you enter on margin, your liquidation price will be very close to your entry price, and if you open a position that is not going to trend in one direction, you will lose money.
None is skilled enough to predict when the price will go up or down in a choppy environment, there is just too much randomness.
To increase your probability of a successful trade, you need to find a market that is currently trending.
When the price is trending in one direction, most of your entries will be successful, as long as you can pick the right pullbacks.
Take a look at the screenshot below of a choppy trading day in BTCUSD:
All of the arrows you see are small breakouts below a range where all of them would result in a quick loss because the price return back to the entry price within a couple of seconds or minutes.
Compare this image to the one from the first strategy and you will see the difference.
You want to avoid these kinds of days where the price doesn’t have a clear trend.
6. Use the correct technical indicator
Which technical indicator do you think is the best in a strategy?
If you guessed volume you are right.
Volume is one of the few leading indicators that will show you confirmation on the important parts of the chart, such as breakouts, and fakeouts.
When you see a breakout through a range you want to see that the move is backed up by other traders, or real volume so to speak.
Below is a screenshot of BTCUSD where the price has been trading in a range of more or less the whole day but in the evening we have a strong breakout followed by heavy volume.
Notice how the rest of the price action is mostly one-sided with a steady price increase.
Other breakouts follow which are also accompanied by higher volume, something that is very common.
This is something you want to see every time you are looking to enter during a breakout.
It’s also something that will give you strong confirmation that the price could continue during the rest of the day.
Or at least, it will allow you to take several trades in the direction of the breakout with a higher probability of success.
You can combine other indicators that you like as long as you use volume to confirm your hypothesis.
7. Always use negative balance protection
Ok, if you are a cryptocurrency trader and you trade on a leverage crypto exchange you don’t have to worry about this since all exchanges have negative balance protection by default.
However, if you are using leverage in CFDs or through forex brokers, then you need to pay some attention to this part.
There are still some brokers out there who will let their clients go into debt from margin trading.
Traders go into debt with their brokers when the losses outsize their initial deposit and this can only happen when there is no negative balance protection in place.
For example, when you deposit $2000 and you lose $5000 on a trade, then technically, you owe the broker $3000.
Not many brokers will let this happen but I’ve seen far too many traders lose out on a highly leveraged position and then they lose more than they have in their trading account.
The easy thing to do here is to avoid using a broker that doesn’t offer negative balance protection.
How can you know that your broker offers this?
It’s simple, every broker should clearly explain to their clients if they have this protection against losses.
Take a look at this screenshot.
Valutrades is a popular broker and they highlight the negative balance protection on their home page.
This is something that you want to see on your broker as well.
This will not protect you from losing money but it will protect you from going into debt, something that could occur when using a high ratio.
8. Only maximize your leverage on big breakouts
If you are looking for a way to use the highest leverage in the fx market that will generate real profits, then this is what you have been waiting for.
Most beginners start by randomly choosing a ratio and then jump into trading only to find out that they are not making enough money to support their commission or their losses.
The way you should think about your trades is that 80% of your gains will come from 20% of your trades, this is something that we wrote about in our first leverage strategy guide.
So, how does this work?
First of all, you need to know your setups and be in tune with your market.
Without this knowledge, it is going to be difficult to choose your ratio effectively.
Once you know when you are about to hit a good trade (something that you should feel naturally), only then is it a good time to maximize your borrowed capital.
For example, if you don’t know if the price is going to start a trend, or if the trend is about to end, don’t use margin.
However, if you have seen a large accumulation of contracts in range and you think that the market might break out to the upside, now it’s time to push the credit to the max.
It doesn’t matter if you are right or not.
The time you are wrong you will take a standard loss and move on.
But when you are right you will make the most money you have made all week, from one trade only.
If you repeat this over and over again, you will see that most of your money will come from a few trades only.
You will also learn that when the market is not in a trend, it’s not worth increasing the leverage.
The more you trade the more you will realize that it’s all about these big breakout days that come a couple of times per month.
Until you find them, keep testing the market without using all your buying power.
This will also save you a lot of capital from going to waste on entry and exit commissions.
Remember, it’s not always time to go all in, but when it is time to go all in, you can’t miss your opportunity, you have to take it.
9. Raise your stop-loss fast
Here is a great strategy that every trader should employ in their daily activities and it has to do with how you protect against losses.
When you open a position in the market, three things can happen.
- You could lose out immediately which is nothing unusual.
- The market ends up not moving and you break even.
- The market starts trading up and you make money from the first 10 seconds.
You will probably experience all of these scenarios as you trade your favorite altcoin, penny stock, or forex pair.
For situations 1 and 2, you can’t do much other than accept the fact that today was not the right day.
However, when you find yourself in situation 3, you have a couple of decisions to make, and depending on what you do here you could become a successful short-term day trader.
Most short-term traders don’t raise their stop-loss because they fear that the market will stop them out too soon and they will miss the whole rally.
This mindset is completely wrong, here is why.
You can’t be personally attached to any position or you will end up making the same mistakes over and over again.
When you open a position and you find yourself in an early profit, raise your SL to breakeven or slightly positive.
From here, see what happens.
Sometimes the market stops your our at a breakeven, which is perfectly fine, as long as you didn’t lose money on that particular trade.
What could also happen is that the price keeps trending up and you get to lock in more profit, which is something that you don’t know.
But as a highly leveraged trader, it is all about protecting your downside to have the chance to take more trades.
More trades mean more opportunities for big gains.
That’s how you need to play it. Focus on limiting your downside at all costs and the upside will take care of itself.
Try this out and you will be surprised to see how often the market just carries you upwards from time to time.
This is where your big gains will come from.
It won’t happen every day but as long as you stay patient it will happen occasionally and you will lock in more money than you have ever made before.
10. Don’t deposit more than you can afford to lose
Let’s just face it, high leverage brings high risk, that’s it.
If you are getting into this game you should know that you are running a high risk of losing all the money you have deposited in your account.
This is something that we as traders have to accept or else can’t be a part of the game.
This is why I always preach that you should never deposit more money than you can afford to lose.
Even if you only can make an initial investment of $200, that’s ok.
Your margin ratio will make up for the lack of capital you have.
When speculating with borrowed money you always need to keep in mind that this is a high-risk game and you could get thrown out of the boat in a couple of trades.
If you can’t accept that, then this style of investing is not for you.
However, if you are fine with that, calculate how much you can afford to lose and make your deposit.
I started out with a deposit of $500 even though I had more money in my regular bank account.
However, I could not afford to lose more than $500.
The more you practice the better you will get and it might take a few blown-up accounts for you to learn the game but make sure that when you blow up you don’t risk all your savings.
There will come a point when you start depositing money in your account and start withdrawing monthly profits, but until then, keep the deposits small.
FAQ
Yes, scalpers benefit the most from high credit ratios due to their short holding times. Since prices fluctuate a lot on shorter timeframes, scalping is the most effective way of using borrowed funds.
You can use any ratio as long as you know when to maximize your borrowing power. Read strategy number 8 to learn when to use the highest ratios. Also, each trader has a personal limit to how much borrowed money they feel comfortable using. As a rule of thumb, the shorter your timeframe is the more capital you can use.
If you are already familiar with this style of trading and you feel that you want to increase your profitable trades you should try it out. However, follow strategy number 10 if you are a beginner.
If proper risk management is used in combination with our best setup, margin trading is not more dangerous than regular trading. The focus should however be on protecting your downside at all costs. Read strategies number 4 and 7 to learn how to protect your downside risk.
If you follow all the strategies outlined in this guide and perfect strategy number 8, there is a good chance that you could make a small fortune occasionally. However, most traders who start out find it difficult to enter and stay in their positions long enough to make significant gains. Try to push the credit on your profitable setups and avoid losing too much money on your bad trades and you could end up making a lot of money.
Final words
In this guide, I break down my 20 most used leverage trading strategies for beginner traders using either high or low leverage.
Every strategy has something to bring to the table whether it’s a way of protecting your downside or a way of increasing profits.
I suggest that you go through all of them one by one and write down the most important things that you read. From here, start by implementing each strategy in your daily trading activities for the best result.
Leverage trading strategies are fundamental building blocks for every trader and in this guide, I’ve broken down my 20 most used strategies for both beginner and advanced traders.
I highly recommend that you read all strategies from top to bottom as they all come together in one way or another.
If you follow these strategies and don’t deviate too much you should see some quick short-term results. If you need further education on the topic, read our guide on leverage trading tips.
