Contracts are often misunderstood as pure gambling, especially when many people use 10x, 20x, or even 50x or 100x leverage when opening positions.
Many people may blow up their positions overnight after just putting money in.
There are usually two types of people who open high leverage: the first type is speculators who are keen on all-in with a small risk-taking mentality; the second type is novices who do not know how to operate and plan positions reasonably and often fail when they first try contracts.
In contract trading, position management is crucial. It not only maximizes the efficiency of capital use, but also effectively avoids risks.
So, how to manage positions scientifically? The key lies in the flexible use of funds. For example, if you plan to open a position of 10,000U, you can choose to use 1000U to open a 10x leverage, or 500U to open a 20x leverage.
Set a stop loss of 1%-3%, and use 10% of the total funds to gain 100% of the potential profit, so that even if there is a loss, the loss can be controlled within a reasonable range.
However, there is a great risk to directly use 10000U to open 10x or 20x leverage. The position may be liquidated if the market fluctuates slightly. There is no room for trial and error, which can easily lead to the loss of principal, thus affecting the mentality.
High leverage is to speculate by borrowing funds several times the principal. The probability of liquidation is very high, but it is rare to make real money.
If you plan to trade contracts, you must first understand the basics, such as leverage multiples, funding rates, etc. Blind operations will only increase risks and eventually lead to liquidation.
Therefore, reasonable position planning and risk control are the key to contract trading.
