In a volatile crypto market, many traders try to earn huge returns through contract trading. However, many people do not have a deep understanding of position size and leverage in contract trading.

Some people always say: "100 times leverage is too dangerous and it is easy to liquidate your position!" Others suggest that low leverage is safer. In fact, these statements are only superficial and inaccurate. Position size is the real key to determining risk.

Imagine that you and I each have $100. I used $1 to open 100x leverage, and you used $100 to open 5x leverage. Although my leverage is higher, my positions are smaller, and I'm actually much safer than you. This is because the position size is equal to "opening funds used × leverage multiple". Therefore, it is meaningless to just look at the leverage ratio. The risk must be determined by looking at the overall position size.

After explaining it this way, you should be able to understand it, right? The level of leverage is not the key, the key is how you manage your position.

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