Risk & Liquidation

Leveraged trading amplifies both gains and losses. Proper risk management is the difference between growing your portfolio and losing your margin.

Position Sizing

The 1-2% Rule: Never risk more than 1-2% of your total portfolio on a single trade.

Portfolio Size	Max Risk per Trade (2%)	At 5x Leverage
10 SOL	0.2 SOL	0.04 SOL margin
50 SOL	1 SOL	0.2 SOL margin
100 SOL	2 SOL	0.4 SOL margin

Leverage Selection

Higher leverage = higher risk. Here's a practical guide:

Leverage	Risk Level	Use Case
1.5x - 2x	Low	Conservative, longer holds
3x - 5x	Medium	Swing trades, clear setups
5x - 10x	High	Short-term momentum plays
10x+	Very High	Scalps only, tight stop-losses

Rule of thumb: If you're not sure, use 2x-3x. You can always add to a winning position.

Stop-Loss Strategies

Fixed percentage stop:

Set a stop-loss at a fixed % below entry (longs) or above entry (shorts)
2x leverage: 10-15% stop = 20-30% max loss on margin
5x leverage: 5-8% stop = 25-40% max loss on margin

Technical stop:

Place stops below/above key support/resistance levels
Below recent swing lows (longs)
Above recent swing highs (shorts)

Always use a stop-loss. The most common mistake in leveraged trading is holding a losing position hoping it recovers.

Liquidation Awareness

Your position is liquidated when losses approach your margin value. The higher the leverage, the closer your liquidation price is to your entry.

Approximate liquidation distances:

Leverage	Long Liquidation (below entry)	Short Liquidation (above entry)
2x	~45% drop	~45% rise
3x	~30% drop	~30% rise
5x	~18% drop	~18% rise
10x	~9% drop	~9% rise
20x	~4.5% drop	~4.5% rise

Actual liquidation depends on interest and fees.

Defend your position

When a position drifts toward liquidation you can:

Add Collateral — lowers loan-to-value (LTV), pushes liq price away (see guide)
Partial Repay — pays down debt, lowers LTV (see guide)
Set a Stop Loss — auto-close before liquidation
Watch LTV / liq price / BF (BF — Accumulated Borrow Fees) on the Portfolio page (see Reading your Portfolio)

Hedging

Use shorts to hedge your existing holdings:

Scenario: You hold 10 SOL ($1,500) and want to protect against a drop without selling.

Solution: Open a 2x short with 150 USDC (equivalent to ~2 SOL exposure). If SOL drops 10%, your 10 SOL loses ~$150, but your short gains ~$30 — offsetting ~20% of the loss.

Common Mistakes

Over-leveraging — Using 10x+ without experience
No stop-loss — "It'll come back" is not a strategy
Averaging down — Adding to losers amplifies losses
Ignoring fees — High-frequency trading with leverage eats returns
Revenge trading — Taking bigger risks after a loss to "make it back"
Ignoring liquidity — Large positions in thin markets get worse fills