When it comes to leverage, I think I’ve mentioned it before. Back in the day, I used high leverage too—5x (the highest leverage I considered reasonable at the time)—and I was doing quantitative trading. Basically, it was breakout chasing with a 1%-2% stop loss, so the maximum loss per trade was 5%-10% of the principal. I believe leverage is extremely effective and necessary when dealing with small amounts of capital, whether it’s off-market leverage or on-market leverage. Off-market leverage refers to loans, including funds. Even Buffett uses off-market leverage. If you have $100 in principal and borrow $10,000 from someone else, offering them 20% dividends, isn’t that essentially giving you 20x leverage for free? If you can’t borrow, loans are a viable option. Of course, this money should only come from one year’s income (after deducting living expenses) and should be used for opportunities with extremely high certainty—not when you’re chasing losses out of desperation. For example, if you earn $100K a year, it’s not reasonable to take out a $1M loan to play the market. Most people take loans when they’re emotional, and the decisions made in those moments are usually wrong. From a rational perspective, taking a loan when you have small capital makes sense because you’re essentially using your future year’s income to bet on a highly promising opportunity right now. On-market leverage, however, must come with strict stop-loss rules. It’s not about increasing leverage and holding on stubbornly, because losing 50% means you’ll need to double your money just to break even. In my early days, I used leverage on naked positions. If I lost, I’d just go back to working a job to make up for it. If I won? Then I’d reduce the leverage. Later, when I had $1M-$10M, I still used leverage for arbitrage, but rarely for naked positions. I never even went all-in. Now, my leverage is much smaller. With larger capital, it’s better to reduce leverage. After all, if you lose everything, working a job won’t make it back. The only way to recover would be to gamble again, and the difficulty of turning a few hundred times your money is obvious. The above is just a rational analysis—a GTO (Game Theory Optimal) approach—but in reality, everyone is different and will deviate from rationality, myself included. My own positions are often far from rational (too small).