In the cryptocurrency space, engaging in futures (especially leveraged trading) is a very high-risk investment method. Futures trading allows investors to amplify their trade scales with minimal initial funds, but this amplifying effect also means that risks are magnified. Without effective risk management, investors may suffer significant losses, even completely losing their initial investment.
Today, I want to share some valuable insights and trading philosophies, hoping to teach you how to fish, allowing novice traders in the crypto space to truly avoid detours and achieve financial freedom as soon as possible.
1. Understand the basic principles of futures trading
First, investors need to understand the basic principles of futures trading. Futures trading allows investors to amplify the scale of their trades through borrowed leverage, going long (buying) or short (selling) a certain cryptocurrency asset. For example, trading with 10x leverage means you only need to invest 10% of the capital to control 10 times the asset. When the market moves in a favorable direction, your profits are magnified; but if the market moves unfavorably, your losses are also magnified.
2. Set stop-loss and take-profit points
Setting stop-loss and take-profit points is one of the most important risk management methods in futures trading. Stop-loss orders help you limit losses in unfavorable market conditions, preventing further loss escalation; while take-profit orders help you lock in profits when the market moves in your favor.
Real-life story: BitMEX liquidation case (March 2020)
On March 13, 2020, the crypto market experienced a 'Black Friday' crash, with Bitcoin's price dropping over 50% in a few hours. Many traders using high leverage suffered significant losses due to not setting stop-loss points or having stop-losses that were too loose, leading to forced liquidations. On the BitMEX platform, many investors did not close their positions or set stop-losses in time when prices plummeted, ultimately resulting in their accounts being forcibly liquidated and suffering heavy losses.
Lesson: When engaging in futures trading, regardless of how favorable the market seems, setting a reasonable stop-loss and take-profit point is essential. Stop-loss orders can help you limit losses in a timely manner and avoid liquidation risks from sudden price reversals.
3. Control leverage ratios
In the cryptocurrency market, many platforms offer high leverage (such as 50x, 100x, or even higher). Although high leverage can amplify profits, it also amplifies risks. To mitigate risks, especially in the beginning, it is recommended to use lower leverage to control risk exposure. Try to avoid using leverage greater than 10x, especially in highly volatile market conditions.
Real-life story: The collapse of 3AC (2022)
In 2022, the well-known cryptocurrency investment fund 'Three Arrows Capital' (3AC) collapsed due to high-leverage trading. 3AC borrowed heavily during the market peak, using high leverage for futures trading. However, when the market experienced significant volatility, especially during the cryptocurrency market crash, 3AC's leveraged positions could not withstand massive losses, ultimately leading to liquidation, and the company was unable to repay its debts and declared bankruptcy.
Lesson: Although high leverage can amplify profits, it also magnifies risks. For ordinary investors, especially those without sufficient experience, using low-leverage trading can better control risks and prevent significant losses during market fluctuations.
4. Choose the right platform and trading pairs
Choosing a safe and reputable trading platform is crucial. Many exchanges offer futures trading, but there are also some platforms where security vulnerabilities or technical issues lead to user losses. Ensuring that you choose a platform with strong liquidity, high transparency, and multi-layered security guarantees is fundamental to risk management.
Real-life story: KuCoin hacker attack (2020)
In 2020, the KuCoin exchange suffered a massive hacker attack, with attackers stealing over $200 million in crypto assets. Although most of the funds were insured, this incident still exposed security vulnerabilities on the platform. For investors engaged in futures trading, hacker attacks or platform security issues may lead to contracts not being closed in time, resulting in additional losses.
Lesson: Choosing a safe and reliable trading platform is vital. The security of the platform directly impacts the safety of investors' funds, especially when engaging in futures trading; the platform's stability and security are crucial.
5. Diversify investments to avoid concentrated risks
Do not invest all your funds into a single futures trade, especially in high-risk markets. By diversifying investments, you can reduce the risk of a single trade failure and ensure more stable returns in a diversified investment.
Real-life story: The collapse of the Terra ecosystem (May 2022)
In May 2022, the LUNA token of the Terra ecosystem and its stablecoin UST collapsed. Many investors concentrated their funds into projects like LUNA and UST, and when the system collapsed, they suffered huge losses. Meanwhile, some investors leveraged their positions in the LUNA futures market, ultimately leading to liquidation and exacerbated losses.
Lesson: Diversifying investments is one of the effective methods to avoid risk. Even if one market experiences volatility, the performance of other investments may help offset losses. Avoid concentrating all funds in a single asset or contract, which helps reduce the overall risk of the investment portfolio.
6. Use demo accounts for practice
Many trading platforms offer demo account features, allowing users to engage in futures trading in a risk-free environment. Through simulated trading, investors can familiarize themselves with the operational processes of futures trading, learn how to set stop-loss and take-profit points, and control leverage ratios, thereby reducing mistakes in actual trading.
Real-life story: A painful lesson for beginners
Many novice investors, without fully understanding futures trading, directly invest substantial funds in high-leverage trades, resulting in account liquidation and significant losses due to market fluctuations and improper operations. Through simulated trading, many novices can avoid losses caused by lack of experience.
Lesson: Practicing through demo accounts is an important step in entering the futures trading market. New investors should conduct multiple simulated trades without financial risks to accumulate experience and improve their trading skills before gradually investing real funds.
7. Psychological control and calm decision-making
In futures trading, emotional fluctuations can lead to poor decision-making, especially during volatile market conditions. Panic may lead you to stop-loss too early, while greed may cause you to over-leverage. Staying calm and following your trading plan, avoiding emotional decisions, is key to successful trading.
Real-life story: The cryptocurrency bull market of 2017
In 2017, the crypto market experienced a massive bull run, and many investors chose to go long as prices surged dramatically. However, after the bull market ended, the market quickly reversed, and many investors did not take profits in time, leading to severe losses during the market crash in 2018. Many panicked and sold off as prices fell, while others over-leveraged and were ultimately 'liquidated' by the market.
Lesson: A calm mindset and rational decision-making are crucial in futures trading. Do not let emotions affect your judgment; follow your established strategy and avoid blindly following trends and overtrading.
Finally, let me share some advice for everyone in the crypto space:
1. Opportunities are to be awaited; patience is needed to hear the voice of wealth.
2. For investors, the most important thing is to seize opportunities that belong to them.
3. Not to be swayed by opportunities that do not belong to you, nor to be disturbed by opportunities that you cannot grasp, is a discipline that investors must possess.
4. It's important to make the right investment, but it's even more important to decide how much to stake after making the right call.
5. Few people can rely on short-term predictions

In the cryptocurrency space, making big money relies on the ups and downs of the market; otherwise, one would be the richest person in the world. If not, it indicates only good news is reported without mentioning the bad. Even if one has a stroke of good luck temporarily, it will eventually lead to a complete failure.
6. If you lose a lot of money, whose mindset can remain good? A good mindset is built on the foundation of not incurring large losses.
7. The world is unpredictable, and the market is hard to gauge. Studying the market is mainly to seize continuous opportunities and avoid ongoing risks. Sudden, occasional rises or falls that you fail to grasp or avoid are not your fault; maintain a calm mindset and do not give up on yourself.
8. You can choose not to participate, but you cannot completely go against the general direction.
9. Do not be driven by the urgency to make money, and do not force yourself to make hasty decisions frequently.
10. Focus on high-probability events while guarding against the large risks that low-probability events may cause. Entering the industry for three years, understanding it in five years, and becoming a king in ten years. Trading is not about getting rich in one go, but about achieving reasonable profits, enabling long-term, stable, sustainable, high-probability wealth generation. Professionalism creates value, and details determine success or failure. If you feel helpless or confused trading in the crypto space right now, I hope my sharing can inspire and help you!
If this helps you, I hope to receive your likes and follows!
