---
title: 'How to Use Leverage in Cryptocurrency Trading and Never Get Liquidated'
source: 'https://youtube.com/watch?v=Ma2J7jARb5k'
video_id: 'Ma2J7jARb5k'
date: 2026-07-23
duration_sec: 1069
channel: 'Trading Zone'
---

# How to Use Leverage in Cryptocurrency Trading and Never Get Liquidated

> Source: [How to Use Leverage in Cryptocurrency Trading and Never Get Liquidated](https://youtube.com/watch?v=Ma2J7jARb5k)

## Summary

This video teaches how to use leverage correctly in cryptocurrency futures trading, focusing on risk management to avoid liquidation. The presenter explains key concepts like capital, risk per trade, stop-loss distance, and liquidation price, emphasizing that leverage is a tool that can be used safely with proper discipline.

### Key Points

- **Advantage of Futures: Bidirectional Trading** [00:44] — Futures allow short positions, enabling profit in both rising and falling markets, unlike spot trading which is unidirectional.
- **Four Key Elements for Safe Leverage** [02:37] — 1) Capital amount, 2) Risk per trade (max 2% recommended), 3) Stop-loss distance from entry, 4) Liquidation price must be outside the stop-loss zone.
- **Liquidation Explained with Example** [05:40] — With 5x leverage on a $250 position, only $50 of own capital is at risk. A 20% adverse move causes 100% loss of that $50, triggering liquidation.
- **Golden Rule: Liquidation Price Outside Stop-Loss** [08:08] — The liquidation price must never lie between entry and stop-loss. Adjust leverage to push liquidation away from the stop-loss zone.
- **Position Sizing Formula** [10:03] — Position Size = (Capital × Risk%) / Stop-Loss%. Example: $1000 capital, 2% risk, 5.71% stop-loss → position size = $350.
- **Leverage Doesn't Change Position Size** [13:32] — Higher leverage reduces the margin required from your pocket, but the total position size and maximum loss remain the same if you follow the formula.
- **Checking Liquidation Price on Platform** [15:07] — Platforms show liquidation price before opening a trade. Ensure it is beyond the stop-loss. If not, reduce leverage.

### Conclusion

Using leverage responsibly requires strict risk management: always calculate position size based on capital and stop-loss distance, and ensure liquidation price is outside the stop-loss zone. When done correctly, leverage is a safe tool for bidirectional trading.

## Transcript

well. In this video, you're going to learn how to use leverage correctly. Welcome to a new video! This time, we're going to learn how to use leverage intelligently and
responsibly, minimizing the possibility of shooting ourselves in the foot. There are many myths surrounding leverage in general, and quite a few negative opinions, saying it's
just a trap to make you lose money. But the truth is, leverage is simply another tool that, when you know how to use it, can be very useful. Personally, what's important to me about
using these types of platforms isn't so much the leverage itself, or being able to multiply my money by 10, 15, 25, etc. What interests me most is having the ability to place short positions because my
strategies are bidirectional. That is, I can make money when things are going up in value or when they're going down in value. This is very different from spot trading, where you 're forced to wait for things to
go up to make a profit; it's unidirectional. So, in that sense, using a platform...  Futures trading allows you to be more dynamic and adaptable to the situation. It
can make things profitable, which is more difficult to do when you're forced to trade in only one direction. For someone trading spot markets, the last few months have certainly been very difficult, but for
certainly been very difficult, but for a futures trader, lately, at least speaking for myself, I've been only shorting and it's been going incredibly well. So that's one of the great advantages
of using a futures platform: it allows you to be more adaptable to the situation. However, before you start using these types of platforms, it's important to do some research and study how they
work, and that's what we're going to do in this video. If you don't know how to do it, then you're very likely to get a nasty shock, even have your account wiped out. Don't lose absolutely everything.
Today we're going to look at some rules you have to follow to use leverage safely. Primarily, there are four things we need to know to use leverage correctly. The
first is to be aware of how much capital we have, and as registered traders, this can translate into different things. It could be...  It can be Bitcoin, it can be Stevia, etc. etc. The next thing is the
etc. The next thing is the risk per trade, that is, how much you are willing to risk per trade, that is, how much you are willing to lose at most if the price reverses and hits the stop loss. Most
people use a maximum risk per trade of 2%. That is, if, for example, trade of 2%. That is, if, for example, we have a capital of one thousand dollars and our trade risk is 2
percent, that means that at most you will lose 20 dollars if you lose that trade. that trade. This is generally in
medium timeframes; that 2% timeframe is two hours, four hours, etc. If you are scalping, you are probably risking much less, so you have to see what your situation is, how much you are risking at most
for each trade. The next thing is to know how far our stop loss is from our entry point. That is, let's
our entry point. That is, let's take this trade as an example. Here we have a signal to enter a trade downwards, so trade downwards, so the entry is at the close—I mean, it's
the entry is at the close—I mean, it's the close of this candle—and the stop loss is at the point of this close. In the case of this system, the place where the stop loss is automatically provided to us.
now. If, for example, you wanted to place your stop loss above the last swing or something like that, it doesn't matter. What we're interested in is knowing how far our entry point is from
the stop loss. In this situation, for example, our distance situation, for example, our distance is 7.38 percent. Okay, so that's what interests us: how far the stop
loss is from our entry point. And the next thing is the liquidation price. The much-feared liquidation price is the reason why many people prefer to forget about futures platforms altogether.
However, there really shouldn't be a reason to fear the liquidation price because it can be stop loss. So let's look at an example of how the
liquidation process works. Okay, liquidation is when you no longer meet the minimum margin requirements. You no longer have margin, and therefore your position is automatically closed. Okay, so let's suppose
that a person has opened has opened a $250 trade using 5x leverage. Okay, so
this means that this person is putting up some of their  If you have $50 in your pocket, the platform is multiplying that the platform is multiplying that by 5, so your position size
by 5, so your position size becomes $250. So, in case of liquidation, you won't lose $250. The maximum you'll lose is this amount, based on the
money you're putting in from your own pocket. For example, here on BuyVIP, I'm going to place an order to open a $250 position with 5x leverage. You'll notice that
here we have the total value of the order, which should be equivalent to $250. But if we look down at the buttons, it says I'm going to open a long position
of 0.00 16 VE TC. If we look 0.00 16 VE TC. If we look at the conversion, what is that? at the conversion, what is that? 0.00 16 times is approximately
$50. So, what you're actually putting in from your pocket here is $50, and that's the maximum you can lose. Okay, so let's assume this is a long position. Now, what
happens if, for example, the price, instead of going up, starts to move in one direction?  Conversely, since we have 5x leverage,
since we have 5x leverage, if the price were to move 20% against us, that would be a 100% loss. In other words, we would be at that moment with a words, we would be at that moment with a 100% loss, and therefore
our margin would no longer meet the requirements to keep that trade open. It would then close automatically, and we would have completely lost those 50 dollars. The important thing about knowing where our liquidation price is is,
above all, to prevent that price from being between our stop loss and our entry point under any circumstances. This is a
rule that must always be followed: the liquidation price cannot be in this zone between our entry price and our stop loss. Okay, this is a bearish trade. What I want to see is that the
liquidation price is on the other side. It can be up here, as far away as it wants, but under no circumstances can it be within this zone. Now, on the other hand, if I am in a bullish trade,
bullish trade, the stop loss is around here again. I don't want to see the liquidation price at these prices. I need the stop loss...  Therefore, the liquidation price may be
up here, and that will also determine how much leverage I can use. how much leverage I can use. Leverage is unfeasible once it pushes the liquidation price in. If the liquidation price is
here, then what we have to do is decrease the leverage so that we push that liquidation price down. Okay, so basically that's how you avoid liquidations,
and you don't have to worry about them again. If the stop loss is well placed, then you won't have any problems with liquidations. Okay, we understand how we can avoid liquidations, we have that
part clear. Now, let's talk more in- depth about the position size for each of the trades we take. What we want to do is consistently risk a fixed percentage of
our capital. That is, in this situation, for example, let's say we want to risk 2 percent for each trade, and whenever we open a trade, we will risk a maximum of $20, which will be the equivalent of 2%
of $1,000. The challenge is that sometimes the stop-loss...  They are larger or smaller, so we have to do some calculations to get that
some calculations to get that correct position size, and the formula looks like this: capital, that is, how much we have in our account x risk in terms of percentage, that is,
2%, 3%, 5%, how much we are risking at most for each trade, and we are going to divide this by the stop-loss distance, also
by the stop-loss distance, also in terms of percentage. So let's in terms of percentage. So let's take an example from here. Let's say we are going to take a long trade,
and our stop-loss is placed here, it is at a For this occasion, it is not really important where our stop-loss is placed, the only thing we need is how far away that
stop-loss is. So all we are going to do is make the substitution: how much capital do we have? Well, in this example, we have one we have? Well, in this example, we have one thousand dollars of capital. How much are we going to
Let's say we want to risk a maximum of 12 percent, and finally, we are going to divide this by the stop-loss distance, which, as
we mentioned, is at a distance of five points, 71%, 5.71 percent. And once  So, let's do this calculation. This should give us the
position size we need to use for this specific trade—how much we should this specific trade—how much we should risk. Okay, so let's do the calculation. Let's open the calculator. We
Let's open the calculator. We multiply 1000 by 2 divided by 5.71, which gives us $350. Therefore,
that means that when I open this trade, if the price reverses and hits the stop loss, what is the maximum I will lose? 2 percent, that is, $20. Let's check
again. We open that calculator; We open that calculator; we have $350, and let's assume that the price hits our stop loss. We multiply this by
our stop loss. We multiply this by 0.0571, and this should give us approximately $20, which is 19.98. Okay, so that's how we know
exactly how much we have to risk for each trade. So, just to emphasize, remember that this is the remember that this is the final position size. This already includes
leverage. If, for example, we're going to use leverage, in our case, we'll have to write $350 in the $350 in the amount box. Okay, now another thing is
that once  We understand this, and we also understand that no matter how much leverage we're using, if I use 10x leverage, the only thing that
will happen is that the platform will take less capital from my pocket and multiply it to $350, which is my total
$350, which is my total position size. If I lose the trade, I'll lose position size. If I lose the trade, I'll lose $20. If I change this, for example, to 5x, the platform will now take a little
more capital from my pocket, but ultimately, my position size ultimately, my position size remains exactly $350, and if I lose the trade, I'll also lose $20. Okay, so that's what
I often mean when I say that leverage doesn't matter. No matter how much leverage you have, if you're respecting respecting this position size we've calculated
using this formula, you shouldn't have any problems, as long as, as we've mentioned so far, your liquidation price isn't around here today. So, going back to BuyVIP, let's see where our
liquidation price is. We have those $350 in the quantity box, and we're going to say that we want to trade towards the  Normally, all these platforms will tell you in advance where your liquidation price is; they
highlight it in yellow to draw your attention and ensure you know exactly what you're doing before opening the trade. So, what we're going to do is go back to the view and locate the liquidation price on the chart,
which in this case is at $25,334. We can see that the liquidation weight is lower than the stop
loss, therefore this trade is valid. The stop loss isn't being protected, and we shouldn't be liquidated. Okay, so
using 5x leverage for this trade is fine; nothing will happen. Now, let's increase fine; nothing will happen. Now, let's increase the leverage to 8. Okay, the leverage to 8. Okay, let's confirm
position. And see how the liquidation price is now getting closer. liquidation price is now getting closer. Let's come back here to see where it is, and you can see how the liquidation price is
much closer, but the stop loss is still protecting us. This trade is correct; we can execute it with that leverage. Now, let's increase it. For example, if you're using leverage at 10x
and want to open a long position, the liquidation price will get even closer.
is already between the entry price and the stop loss. Therefore, this trade cannot be executed with that leverage; you have to reduce it. And that's basically how you use leverage
responsibly and intelligently, without taking unnecessary and foolish risks. I hope this is very useful and that I've clarified several points. If you want to register on Avavit, which is my preferred trading platform, you can
do so in the pinned comment. You'll receive a welcome bonus and can start trading with it. See you in the next video. Goodbye!