$ETH
Why do so many people still play in the cryptocurrency contract market despite frequent liquidations?
1. Capital management must be on point. With leverage from 0-100x, it's inevitable to incur losses in the short term. The risk per trade should generally not exceed 2%-3%, while aggressive players may take on 5%-8%. A risk level exceeding 8%-10% can lead to a drawdown of up to 70% during unfavorable periods, and the average person's psychological breaking point is around 50%.
Many people prefer to trade with 5x or 10x leverage, operating on charts of 4 hours or longer. The stop-loss for 4-hour charts typically ranges from 5%-15%, resulting in a risk per trade of 25%, which is akin to courting disaster. To manage risk effectively while still utilizing high leverage, the time frame must be lowered to 1 hour, 15 minutes, or 5 minutes. The smaller the time frame, the fewer players can handle it; generally, 1h-4h is the limit for average players, while 5-15 minutes is manageable for professional traders. Even professional traders usually struggle with 1-minute charts.
2. The trading system must be effective. Refining a trading system requires long-term trading experience. During this process, continuous iteration is necessary, experiencing the baptism of mainstream trends during bull and bear markets. Since this involves leveraged trading with T+0 and frequent transactions, you need to prepare for the tuition of 90%x9. Many people start with hundreds of thousands without realizing that no matter the initial capital, it's only enough for one tuition payment; there are still 8 more to go. Profits should be withdrawn, and small amounts should continue to be traded. Initially, the system and operations won't be particularly refined, and many mistakes and unnecessary actions are unavoidable. Many posts claim to have lost a certain amount; in my view, such losses are meaningless—they're just a one-time tuition payment, without even touching the door, and the learning curve hasn't improved; it's no different from gambling.
3. Execution capability must be solid. Similar to last year's May 19 incident, a wrong directional bet can lead to irreversible consequences; any profits made before such a black swan event become meaningless. Strict stop-loss measures are essential, and more liquidations occur from counter-trend bottom-fishing. Recent events like Luna are also examples of counter-trend bottom-fishing leading to liquidation. Avoid betting 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, it's crucial to understand the market characteristics of different stages and adjust strategies accordingly. For small retail traders, the time spent in this market is inherently limited, making it very difficult to engage in such a specialized market.