What are the risks of liquidation in perpetual contracts?

1. Pin-spiking behavior: This is very common. It exists in major exchanges. It is said to be caused by technical problems, but it is often speculated that it is difficult to judge whether it is the behavior of the exchange itself.

2. Uncontrolled and continuous increase in positions: When placing an order for the first time for a perpetual contract, everyone generally has a clear understanding of the liquidation price position after placing an order, but many people only see the liquidation position of the first order and have not considered the liquidation position after their own increase in positions. Therefore, there are many liquidations in this scenario.

3. Distorted mentality of return: After the loss of perpetual contracts, many people will have serious problems with their mentality. Suppose you lose 100U, then you may want to return the capital immediately, so you impulsively place an order again, resulting in a loss of 200U, and then continue to lose your mentality, resulting in a loss of 400U. If this continues, you may not be liquidated many times, and you are lucky enough, because like gambling, there is always one guess in 10 times, so in most cases, there will be no liquidation, but once the liquidation occurs, you will lose a very large amount of money, causing all your previous efforts to be wasted.

4. Liquidation in stable market: One principle of the contract is not to hold the order for too long. The perpetual contract is not a financial product for long-term investment. It is a financial derivative. Therefore, it is best not to hold it for more than 3 days, unless you have made a profit. Therefore, do not hold it for more than 3 days. If you exceed it and you are still closing or losing money, it is recommended that you close the position as soon as possible and then find an opportunity to make up for it.

5. Chasing short or long: In a continuous decline or rise, if there is a sudden drop or rise in volume, many people will chase short or chase long. For example, the 15-minute/30-minute/1-hour K-line or RSI is falling, and then there is a sudden drop in volume at the moment. Many people may chase short, resulting in a large-scale rise in this wave and liquidation. #BTC