Because of greed, because of poverty, because of ignorance, and more importantly, because of the dream of getting rich overnight, more and more new investors are joining the family of contract trading in the cryptocurrency world.
I don't know if you've heard the saying 'Cherish life, stay away from contracts'? Many people enter the cryptocurrency world hoping to find a thousandfold coin, dreaming of getting rich overnight. As a result, many beginners haven't even established a trading system or know what K-lines are, yet they leverage trades, hoping to achieve financial freedom by tomorrow.
I suggest that everyone understand what virtual currency contracts are, what advantages and risks they entail, and whether they are suitable for themselves before trading virtual currency contracts. Can you really outsmart your own nature and avoid liquidation?
Those who have traded contracts may understand what I am saying. Even though they know all the trading disciplines, like stopping losses, taking profits, and controlling leverage, when it comes to actual trading, they forget it all, not executing stop-losses when they should, hoping to hold on to their positions, only to end up getting liquidated.
Moreover, playing contracts can easily lead to excitement; feeling that small leverage is not enough, they jump in with 50x leverage in pursuit of thrills. Behind the 50x leverage is the amplified greed of human nature. Many investors find it hard to control their impulses at that moment, unable to stick to trading discipline, resulting in losses and exit. Often, the biggest enemy in trading is ourselves.
Contract trading is about the thrill of big gains and big losses. If you see the right direction, you can become rich overnight; if you see the wrong trend, you may end up impoverished overnight. Before deciding to enter the market, investors should first understand the pros and cons of contract trading and make decisions after careful consideration. There is no guaranteed way to make money, especially when it comes to making big and quick profits.
Contract trading can amplify profits while also carrying a significant risk of loss. The biggest risk is liquidation. With a pop, your position becomes a passerby.
Most seasoned cryptocurrency traders feel apprehensive when mentioning 'spike' patterns in K-lines. The so-called spike refers to a thin line on the technical chart, where a candlestick suddenly plunges (or surges), representing a momentary collapse (or spike) in coin price, quickly stabilizing afterward.
For spot investors, there is no difference as long as assets are not sold during the spike phase; this brief moment will not affect any profits. However, playing contracts is different because leverage amplifies both the rise and fall. If you open a 100x contract, even a 1% instantaneous drop in coin price will immediately liquidate your position, and even if it later rises 1000 times, it won't matter.
Sometimes investors will find that they clearly see the trend, but their position is gone, simply because the coin price was once spiked (up or down) at some moment, directly opposite to their trading direction, leading to liquidation.
Of course, can contracts really be played? The answer is definitely yes. Existence is reasonable. Just before playing contracts, ask yourself if you have made sufficient psychological preparations.
Humans are born with a gene for adventure, and the risks of contracts cannot overshadow their 'shining point' of multiple profits. However, investment requires calm analysis and sufficient preparation.
Learning to establish a trading system that suits you can make you more confident during trades, easier to execute, and more willing to abide by trading discipline. This way, your mindset will improve, making it easier to make the right decisions.
A good trading system usually includes several important factors: how to stop losses, how to take profits, how to control the risk-reward ratio, how to manage positions, how to trade with the trend, and how to reasonably control leverage size, etc. Each investor's trading system may differ, and it's important to summarize a set that suits oneself based on personal experience. Only when you are well-prepared can you enter the contract market.