Contract Trading: Heaven and Hell, Just a Thought Away
Recently, a fan friend chatted with me. He told me that he worked hard in a factory for half a month and finally saved some money by living frugally. As soon as he got off work, he hurriedly threw all his money into Binance, dreaming of turning his fortunes overnight with high leverage contracts. What happened? He stepped into the trap set by the big players and lost everything.
I need to talk to those newbies who just stepped into the crypto world: never play with fire right away. What 10x, 20x, or even 100x leverage is, those are life-threatening! As soon as the money arrives, it could all be gone in one night with just one careless move, leaving you with nothing! Those who love to play with high leverage either have a gambling nature, wanting to gamble small to win big, addicted like drug use; or they are pure beginners who know nothing, can't manage their positions, and lose all their money before even understanding the contracts.
When trading contracts, position management is absolutely paramount! You need to find ways to make your money generate more money while also guarding against risks. How do you manage that? It's actually not difficult; you have to know how to spend money and be flexible. For example, if you want to open a position of 10,000 U, you can use 1,000 U to open 10x leverage, or you can use 500 U to open 20x leverage. But remember, you must set a stop-loss line for yourself, around 1% to 3% is about right. This way, you only use 10% of your money to strive for 100% returns, and even if you lose, it is within your acceptable range.
But if you foolishly use 10,000 U to open high leverage directly, even a slight market fluctuation can scare you out of your wits. You have no room for error, no chance to make mistakes, and one careless move can lead to complete financial ruin. By then, your heart will be shattered.
So, using high leverage to borrow several times more than your principal to speculate is a recipe for frequent liquidation, and making money is a rare event. If you want to trade contracts, you first need to solidify your foundational knowledge, such as leverage ratios and funding rates. If you know nothing and operate blindly, and end up liquidated, you can’t blame the tools.
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