《The root cause of contract explosion》
It is indeed because you have used funds that exceed your actual ability to bear, that is, high leverage.
Suppose you have 1000u, but you choose to use 100u for 100 times leverage trading, which means that the amount of funds you actually operate is 10000u, of which 9000u is borrowed. This 9000u does not belong to you. Once the market fluctuates by more than 10%, your principal of 1000u will be lost.
In this investment field, market fluctuations of 10% or so are very common, almost "commonplace".
Contract trading is just a tool, just like when you are bearish on the market, you need to use it to short, while spot trading can only buy.
We often see 10x, 20x or even 100x leverage, but don't forget that there is also the most basic 1x leverage, that is, the situation where no additional borrowing is used.
Remember, there is nothing wrong with the tool itself, the key is how we use it. A knife can be used to protect yourself, but it can also hurt yourself inadvertently. The key lies in the user's skills and mentality.
If you don't know how to do it and are confused, then pay attention to me. Leave a message with your question or click on my avatar to see.
You don't necessarily lose money in the cryptocurrency circle. If you don't learn and ask, you deserve to lose money!
Come on, coin keepers.
Click on my avatar. Pay attention, and share in the next issue: "Five Skills for Retail Investors in Cryptocurrency Trading"
