$ETH
Why do so many people still play in the crypto contract market despite frequent liquidations?
1. Capital management must be up to standard. With leverage of 0-100x, short-term losses are inevitable, and the risk level for a single trade should generally not exceed 2%-3%, with aggressive players at 5%-8%. Risks exceeding 8%-10% can lead to a drawdown of up to 70% in unfavorable conditions, and the mindset of an average person breaks down around 50%. Many people like to go for 5x or 10x leverage with trades at 4h or above; the stop loss for levels above 4h is generally at 5%-15%, resulting in a single trade risk level that has already reached 25%. Doing this is akin to seeking death. To ensure risk levels while also maintaining high leverage, the trading time frame must be lowered to 1 hour, 15 minutes, or 5 minutes. The smaller the time frame, the fewer players can manage it; generally, the limit for average players is 1h-4h, while professional players can manage 5-15 minutes, and the 1-minute level is typically beyond the reach of ordinary professional players.
2. The trading system must be competent. Refining a trading system requires long-term trading experience accumulation. This process requires continuous iteration and exposure to the baptism of mainstream trends during bull and bear markets. Since it involves leveraged trading, T+0, and frequent transactions, one needs to prepare 90%x9 as tuition fees. Many people come in with hundreds of thousands to play, but it's essential to understand that no matter the initial capital, it only covers one tuition fee, with 8 more to follow. Profit should be withdrawn, and continue trading with small funds; initially, the system and operations will not be particularly refined, and many mistakes and unnecessary actions are unavoidable. Numerous posts mention losses, but to me, such losses are meaningless; it’s just paying a tuition fee without even touching the door, and the learning curve hasn't improved, making it no different from gambling.
3. Execution ability must be adequate. Similar to last year's May 19 incident, a single wrong bet can lead to irreversible consequences; any money earned beforehand becomes zero if such black swan events are not navigated. Strict stop-losses are a given, but many liquidations occur due to contrarian bottom fishing, like the recent Luna incident, which also resulted from contrarian bottom fishing. Do not bet on low-probability events, and don't fantasize about achieving everything in one go.
4. Time and experience accumulation. In a round of bull and bear market fluctuations, one needs to familiarize oneself with the characteristics of various trading instruments at different stages and adjust strategies according to market conditions. For small retail traders, the time spent in this market is inherently limited, making it very difficult to engage in such a specialized market.