Unit 1 · Level 4 · Leverage & Margin
Sizing WITH leverage
The good news: leverage changes NOTHING about correct sizing. Risk = position size × stop distance. Choose your stop, cap the risk at 1% of account, derive the size. Leverage only determines how much CASH must sit in margin. The formula from League 2 already handled this. You were ready before you knew it.
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What you get asked
$10k account, 1% rule ($100 risk), stop 2% away → $5,000 position. At 5x leverage, how much margin does it need?
Same $5,000 position, same $100 risk if stopped. The 5x freed $4,000 of cash. THAT is the professional use of leverage: efficiency, not size.
The amateur inversion: same $10k account, but the trader puts the FULL $10k as margin at 10x, opening a $100k position with a 2% stop. Risk if stopped?
Same tools, opposite grammar: pros derive position from risk; amateurs derive position from available margin. The second sentence ends accounts.
Order the leveraged trade construction, pro grammar
Step 5 is the League 4 addition: liquidation must be unreachable, because the stop exits you long before the lender ever could.
Golden rule: your ___ must always trigger long before your liquidation price.
If liquidation is even in the conversation, leverage is too high for the stop distance. Widen margin or shrink leverage. The stop stays sovereign.
You'll risk €50 on this trade and your stop sits 2% below entry. What position size in euros does that allow, at ANY leverage?
Position = risk ÷ stop distance = €50 ÷ 0.02 = €2,500. Leverage only changes how much CASH you must post; it never changes the risk math. The formula stays king.
After this lesson, what does '10x' actually tell you about a trader's risk?
Leverage-number machismo is noise. The only numbers that matter: % of account at risk, and where the exits are. You now think in the right units. 🐜
The rest of this unit
Amplification, liquidation, short selling, and why the 1% rule survives it all.