Why do some people suggest that beginners avoid contract trading in the crypto world?
In the crypto world, trading contracts (especially with leverage) is a high-risk game. Contract trading allows you to do big things with a small amount of money, but the risks are also magnified. If you don't manage the risks well, you could end up losing everything.
Today, let's talk about some practical insights and share trading experiences, hoping to help beginners avoid detours and achieve financial freedom sooner.
Understand what contract trading is all about
Contract trading, simply put, is borrowing leverage to amplify buying and selling. For example, with 10x leverage, you only need to invest 10% of the money to control 10 times the assets. If the market moves in your favor, you can make a fortune; if it moves against you, the losses can be painful.
Set stop-loss and take-profit correctly
In contract trading, setting stop-loss and take-profit is crucial. Stop-loss helps you hit the brakes in time to prevent massive losses; take-profit locks in profits to ensure you don't lose the money you've gained.
On March 13, 2020, the crypto world experienced a “Black Friday” with Bitcoin plummeting 50%. Many high-leverage traders didn't set stop-losses or set them too high, resulting in forced liquidations and significant losses.
Lesson: No matter how tempting the market, stop-loss and take-profit must be set properly to prevent liquidation.
Don't play with too much leverage
Crypto platforms offer high leverage, like 50x or 100x, which sounds exciting. But high leverage means high risk. Beginners should take it slow, use low leverage, and proceed steadily.
In 2022, the crypto investment fund 3AC collapsed due to excessive leverage and eventually went bankrupt.
Choose platforms wisely
Choosing a good platform ensures safe trading. Some platforms have numerous security vulnerabilities and inadequate technology, putting users at risk. It's important to select a platform with strong liquidity, high transparency, and guaranteed safety.
In 2020, KuCoin was hacked, and $200 million in assets were lost. Although most were insured, the security flaws still caused headaches.
Lesson: Platform security is the most important; choosing the right one gives you peace of mind in trading.
Don't put all your eggs in one basket
Don't invest all your money in one contract, especially during volatile market conditions. Diversifying investments reduces risks and ensures steady profits.
In the upcoming layout direction, I will guide everyone to target profitable opportunities in altcoins, especially those with high potential projects, where expected returns of over 10 times are definitely possible. If you want to make big money in the bull market, like and comment, and I'll take you through the entire bull market!