Perps Risk Management Strategy

When to Use

• Opening any leveraged position
• Deciding on position size
• Setting stop-loss levels
• Managing multiple open positions

Core Risk Rules

1. Leverage Limits

• Max leverage: 5x for majors (BTC, ETH, SOL)
• Max leverage: 3x for altcoins
• Never: Use max available leverage regardless of confidence
• Exception: 1x "leverage" is just spot with funding exposure

2. Position Sizing

• Single position max: 20% of perps balance
• Total exposure max: 60% of perps balance
• Max concurrent positions: 3
• Scale in: Open 50% initially, add on confirmation

3. Entry Criteria

• Funding rate direction aligns with trade (negative = long, positive = short)
• Volume > $10M in last 24h
• Open interest not at extreme levels
• Clear technical setup or catalyst

Funding Rate Strategies

Long Bias (Negative Funding)

• Funding < -0.01% per 8h = strong long signal
• You get PAID to hold longs
• Best for range-bound markets

Short Bias (Positive Funding)

• Funding > 0.05% per 8h = crowded long
• Market vulnerable to liquidation cascade
• Consider contrarian short with tight stop

Neutral (Funding ~0)

• No funding edge either way
• Rely on directional conviction only

Position Management

Stop Loss Rules

• BTC/ETH: 3-5% from entry
• Altcoins: 5-8% from entry
• Memes: 10-15% or don't trade

Take Profit Rules

• Scale out at 1:1 risk/reward (50% of position)
• Move stop to break-even
• Let remainder run with trailing stop

Liquidation Awareness

• Know exact liquidation price BEFORE entering
• Never let position get within 20% of liquidation
• Reduce size if margin ratio drops below 50%

Warning Signs

Don't Trade When

• Funding rate is extreme (>0.1% or <-0.1% per 8h)
• Open interest at all-time highs
• Major news event imminent
• Market in rapid directional move (chase = death)

Exit Immediately If

• Position moves against you 50% of stop distance on entry candle
• Funding rate flips aggressively against your position
• Liquidations cascading in your direction

Checklist Before Opening Position

• [ ] Leverage <= 5x (majors) or 3x (alts)
• [ ] Size <= 20% of balance
• [ ] Know exact liquidation price
• [ ] Stop loss set (in system or mental)
• [ ] Funding rate favorable or neutral
• [ ] Not chasing momentum
• [ ] < 3 open positions total