Why are so many people still trading in the crypto contract market despite frequent liquidations? In fact, contracts are not intended for the average player.

1. Capital management must be sound. With leverage between 0-100x, short-term losses are inevitable. The risk per trade should generally not exceed 2%-3%, with aggressive traders at 5%-8%. Exceeding a risk level of 8%-10% may lead to a drawdown of 70% in unfavorable periods, and the psychological breaking point for most people is around a 50% loss. Strict execution of capital management is essential.

Many people like to trade with 5x, 10x leverage, operating at levels above 4h. The stop loss at levels above 4h is generally between 5%-15%, and the risk for a single trade can reach 25%. Doing so is akin to seeking death. To ensure risk management while also maintaining high leverage, the levels must be lowered to 1-hour, 15-minute, or 5-minute charts. At smaller levels, the number of traders who can manage these decreases; generally, players can handle up to 1h-4h, while 5-15 minutes is manageable for professional traders, and 1-minute levels are generally beyond the reach of most professional traders.

2. The trading system must be sound. Developing a trading system requires long-term trading experience accumulation. A successful setup is characterized by not trading outside the model and having clearly defined conditions. In this process, continuous iteration is needed, going through the baptism of bull-bear volatile markets. Due to leveraged trading, T+0, and frequent transactions, one should prepare to pay 90%x9 in tuition. Many people start with hundreds of thousands; it’s important to understand that regardless of the initial capital, it’s just enough to pay tuition once, with eight more times to follow. Therefore, one must start with small funds; a few hundred or a few thousand is fine. Do not increase capital just because of profits; withdraw profits and continue trading with small amounts. At the beginning, systems and operations won't be particularly refined, and many errors and excess actions are unavoidable. Many posts talk about losses; in my view, such losses are meaningless, just paying tuition once without fully grasping the market dynamics, making it no different from gambling.

3. Execution must be reliable. Similar to last year's 519 incident, making a wrong call can lead to irretrievable losses. Any profits made before are nullified if such black swan events are not navigated. Strict stop losses are a given; many liquidations occur from counter-trend bottom fishing, similar to the recent Luna situation, which also faced liquidation from counter-trend bottom fishing. Do not gamble on low-probability events, and do not fantasize about achieving everything in one go.

4. Time and experience accumulation. In a bull-bear volatile market, one needs to be familiar with the market characteristics of different stages and adjust strategies accordingly.

For small traders, the time spent in this market is inherently limited, making it very difficult to engage in such a professional market. Several suggestions are offered.

1. Use small funds for trial and error.

2. Keep leverage below 2/3 times. Based on the premise of understanding the larger cycle, make appropriate financial plans and consider rolling positions.

3. Trade on 1h, 4h, or daily levels in larger cycles.

4. Insufficient conditions; non-professionals should avoid contract short-term trading, and professionals should not engage unless there are no other options.

5. Without completing the first four items, do not invest more than 20,000. Treat any losses as if you were spending pocket money that you wouldn’t mind losing.

In fact, in terms of difficulty, contracts are much harsher than arbitrage and spot trading in terms of outcomes. Don’t be deceived by the few at the top of the pyramid; they are merely baiting retail investors. Who doesn’t know that for every successful general, countless bones have been left behind?

Hope for fewer tragedies and more rationality. Trade lightly, follow the trend, and set stop losses. The above suggestions are aimed at saving your wallet; do not fall into the quagmire of gambling and take a road of no return. If you have 2000 yuan, why engage in contracts? Even if you make ten times in a year, that’s just 20,000 yuan, which isn't worth it compared to other avenues. Many people end up obsessing over it, determined to make it work, but the opportunity cost is much higher than other paths. Act according to your conditions and capabilities.

Duàn Chénběi has rich practical trading skills and unique trading concepts. He has a deep understanding of indicators such as K-line, BOLL, MACD, and MA. He possesses solid technical foundations and market forecasting abilities, and is good at turning losses into profits and managing trading plans. If your recent trading has been unsatisfactory or you feel confused about the future, you might consider following Old Duan's professional tips and systematic learning. You're also welcome to chat with me and share your thoughts.