In the early morning of March 2020, I stared at the red prompt on the screen that said 'position has been liquidated', my fingertips still trembling over the 200,000 principal, which evaporated into a string of numbers in less than 12 hours. That day, the streetlights outside shone until dawn, but I felt like the whole world was dark because I finally saw clearly: in the crypto market, contracts are never a 'shortcut to making quick money', but rather a hell that tests human nature.
As an analyst who has immersed in the industry for many years, I have seen too many people rush into the contract market with the fantasy of 'doubling overnight', only to end up losing even their principal. After that liquidation, I spent half a year breaking down the delivery notes into pieces for review, summarizing three rules that allow me to 'sit steadily on the fishing platform' to this day, and I want to share them with everyone today:
1. Never touch the 'life and death line' of position: 10% is the bottom line, 5% is safer.
Many people feel that when their 'principal is small, they need to add leverage to compensate', which is precisely the beginning of liquidation. Back in the day, I opened a full position with 200,000 at 5x leverage, which is like gambling with 1,000,000. Once the market moves against you, there’s no room to buffer. Now, my advice to fans is: regardless of how much principal you have, the contract position must not exceed 10%, and beginners should directly keep it at 5%. For example, with 100,000 in principal, at most take 5,000 to open a position; even with 3x leverage, the total risk remains controllable. Even if wrong, there’s still 95% of the principal to come back.
2. Dual stop loss and take profit: Use 'mechanical rules' to defeat 'human greed'.
'I feel it can go up more' 'Just hold on a bit longer and it will rebound' — these thoughts are the death knell of contracts. The correct approach is to set up a 'dual offense and defense' before opening a position: when going long, find key support levels, and if it breaks, stop loss immediately; when going short, closely watch resistance levels, and if it breaks, decisively exit. Last year, when I opened a long position on ETH with 10,000, I set the stop loss 5 points below the support level, and after taking profit at the target level, I would move the stop loss up to the cost line, essentially 'zero-risk profit'. Remember, in contracts, there is no 'feeling', only 'rules'.
3. Do not go against the trend: waiting for 'confirmation signals' is better than trying to catch the bottom.
The core mistake during that liquidation was trying to 'catch the bottom' in a clear downtrend. Once a trend forms in the cryptocurrency market, it often lasts longer than you might think. Now I never open a position against the trend when it breaks key moving averages; instead, I wait for a 'confirmation signal' to appear in the trend — such as stabilizing at support after a pullback, or volume starting to increase, before entering with a small position. The trend is the 'tailwind' for contracts; going against it will only get you flipped over.
Now I occasionally trade contracts, using only 5% of my principal for small operations. During last year's ETH market, I made 20,000 from an initial 10,000, although it wasn't the thrill of 'getting rich overnight', this kind of 'sleeping soundly' profit is the way to long-term success. In fact, contracts are like thorny thistles; while they seem to offer sweet fruits, one careless move can lead to severe injuries.
In the cryptocurrency market, being 'alive' is always more important than 'making quick money'. Keeping your principal gives you countless opportunities to seize market trends; once your principal is lost, no matter how strong the trend, it has nothing to do with you.