In the cryptocurrency circle, discussions about perpetual contracts have never stopped.
Some say it is a 'hotbed of liquidation', and playing with contracts is a path to 'death'; while another camp believes that perpetual contracts are a shortcut to rapidly accumulating wealth, seizing opportunities to soar.
So, every day we see spot traders and contract traders arguing with each other, with spot traders mocking contract traders as 'Du dogs', while contract traders curse spot traders for 'only knowing how to shout orders and cut leeks'.
So, what exactly are perpetual contracts? Are they an 'investment paradise' or 'hell'? Let's analyze it together!👇
What are perpetual contracts?📜
In simple terms, a perpetual contract is a trading tool similar to a futures contract.
The difference is that it has no expiration date—meaning you can hold positions indefinitely without having to wait for a specific date to settle like traditional futures.
In theory, this provides investors with greater operational flexibility, but it also means that risks increase accordingly.
Why are perpetual contracts so popular?🔥
Leverage boosts profits: You can leverage a smaller amount of capital to control a larger market, which is like adding a 'booster' to your investment. As long as your judgment is accurate, leverage can quickly amplify your returns.
Flexible and diverse, easy to operate: Without the constraints of an expiration date, you can enter and exit the market at any time, making it convenient to go long or short, and even make money in a bear market.
24-hour uninterrupted trading: Perpetual contract trading is almost 24 hours a day, and when the market fluctuates significantly, you can seize opportunities to operate at any time.
But do you think perpetual contracts are just a 'gold mine' where you can make money without risk? NO! Its biggest risk is the leverage effect, which can lead to liquidation with a small mistake.
For some inexperienced players, they may find their account balance instantly drops to zero once the market fluctuates wildly.
Several key points in contract trading⚙️
After understanding the basic principles of perpetual contracts, let's take a look at several key points that must be mastered in contract trading:
Leverage and Risk
The biggest feature of contract trading is leverage. Leverage allows you to control a larger market share with less capital, but it also exposes you to greater risks. The higher the leverage, the greater the risks; the more you earn, the more you can lose.
Therefore, when playing with contracts, you must carefully control leverage and avoid excessive greed.Setting Stop-Loss and Take-Profit
Because the contract market fluctuates wildly, stop-loss and take-profit are your essential 'protectors'. Before opening a position, make sure to set your stop-loss and take-profit points, and do not let market fluctuations affect your emotions.
Especially for beginners, setting a stop-loss can effectively avoid large losses.Opening and Forced Liquidation Mechanism
Perpetual contracts do not have an expiration date, but that does not mean you can hold them indefinitely. If the market price fluctuates significantly, it may reachLiquidation Line (forced liquidation).
If the account margin is insufficient, the trading platform will forcibly liquidate, and stop-loss and take-profit will not take effect.
Therefore, it is very important to manage funds properly to avoid forced liquidation.
Is playing with contracts a slow form of suicide, or a shortcut to wealth reversal?🤷♂️
Perpetual contracts indeed have their allure, allowing for rapid capital appreciation in a short period, but they are also filled with high risks. Without sufficient trading experience, blindly using leverage can easily lead to 'injury'—which may cause you to lose all profits, or even principal, in a short time.
For most investors, the best approach is: first understand the basic rules of contracts, and then decide whether to participate based on your risk tolerance. If you are a beginner, it is best to start with low leverage and small amounts, gradually accumulating experience.
If you're an experienced investor who can react quickly, perpetual contracts may be your shortcut to wealth; but if you just want to 'test the waters' and don't have sufficient risk tolerance, you should stay away from it, after all, 'one misstep leads to eternal regret', and you must have seen many old brothers go bankrupt directly because of it.
Contract traders and spot traders will always have different voices and opinions, but the most important thing is—do what you are good at and act within your means!
