Position sizing & risk management for perps

Most guides to perps start with "how much leverage should I use?" That is the wrong first question. Leverage is an output of two decisions you should make earlier: how much you are willing to lose on this trade, and where you will admit you were wrong. Get those two right and the leverage setting almost chooses itself.

Start from the loss, not the leverage

Decide, per trade, the maximum dollar amount you accept losing if your stop is hit. A common rule among disciplined traders is a small fixed fraction of the account — 1% to 2% per trade. The logic is survival: at 1% risk, ten consecutive losses cost around 10% of the account, which is recoverable. At 10% risk, ten losses is most of the account, and the stress of the sixth loss tends to produce the seventh.

There is nothing magic about 1%. What matters is that the number is fixed before you look at the chart, and that it is small enough that a losing streak is boring rather than fatal.

The framework in three steps

1. Account risk. Account size × risk percentage = dollars at risk on this trade.
2. Stop distance. Entry price versus the price at which the trade idea is wrong, as a percentage. This comes from the market — a support level, a recent low — not from how much you would like to lose.
3. Position size. Dollars at risk ÷ stop distance = the notional size of the position.

Only then do you ask how much margin to post and, therefore, what leverage that implies.

A worked example

Say your account holds $5,000 and you risk 1% per trade, so $50. You want to go long a token at $100 and your analysis says the idea is wrong below $95 — a 5% stop distance.

• Position size = $50 ÷ 5% = $1,000 notional.
• Against a $5,000 account, that is 0.2× — you would not need leverage at all.
• If you use isolated margin and post $200 to back it, the position runs at 5× on its own margin. The stop at $95 hits long before any liquidation, which sits far lower.

Now the common mistake, run the other way. A trader picks "20×" first, posts $500 of margin, and opens a $10,000 position. The same 5% stop now costs $500 — 10% of the account on one idea. Nothing about the trade changed except the order of the decisions.

Leverage, in this framework, is simply notional ÷ margin. It is a consequence of how much margin you choose to lock up for a position whose size was already fixed by risk. Posting less margin for the same size raises leverage and moves the liquidation price closer to your stop, which is the one thing you must never let happen: the stop should always trigger first.

Cross vs. isolated margin: what actually changes

Lesson 44 introduced the two modes. From a sizing point of view the difference is what backs the position when it goes wrong.

• Isolated: only the margin you assigned can be lost. The liquidation price is closer, but the damage is capped at that margin. Your stop-loss, not the venue, should be the thing that closes you out.
• Cross: your whole account balance backs the position. Liquidation is further away, which feels safer — but a loss keeps eating into the account, and several positions can fail together. Cross margin makes it easy to lose more than your planned risk without noticing.

For anyone still learning, isolated margin with a stop-loss and a small, pre-calculated size is the combination that makes mistakes survivable. Cross margin belongs to traders who actively manage several correlated positions and know exactly what the shared collateral is doing.

The slow costs

A stop caps the fast loss. Three costs work more slowly and are easy to forget in the size calculation:

• Funding on the notional, every interval, for as long as you hold (previous lesson).
• Fees on entry and exit, both on notional. At $1,000 notional and a few basis points each way, small; at $10,000, ten times larger for the same account.
• Slippage on the stop itself, which fills worse than planned in fast markets. Budget for it by placing the stop slightly inside your risk limit.

A pre-trade checklist

• Dollars at risk written down before looking at the entry.
• Stop price chosen from the chart, then size derived from it — not the reverse.
• Liquidation price checked and confirmed to be well beyond the stop.
• Stop order placed, reduce-only, at the moment the position opens.
• A day's funding cost known in dollars.

This is unglamorous, and it will make you trade smaller than the leverage slider suggests. That is the point. Venues differ in maximum leverage, margin modes and liquidation mechanics — compare them side by side on the compare hub before you rely on any of them.

Written and reviewed by the dexwatch editorial team. Last updated 2026-09-22. Educational content, not financial advice. Spotted an error? Tell us.