Let me briefly explain what perpetual contracts are. Perpetual contracts, as the name suggests, are contracts that are continuously renewed. In the current digital currency derivatives trading market, perpetual contracts can be considered a relatively new type of contract. The meaning of a perpetual contract is that, under the premise of not being liquidated, if you do not actively close your position, you can hold this contract indefinitely. So, how much leverage is reasonable to use when trading? Yesterday, someone asked me this question, so I’ll discuss it today. In a conversation with a fellow trader yesterday, he mentioned that he usually trades with 50x or 30x leverage. Taking Bitcoin as an example, 30x leverage requires 16 USDT, 50x leverage requires 10 USDT, and 100x requires 5 USDT. Under the same market conditions, my personal suggestion is to only use 100x leverage. Why? Because once you use leverage in trading, whether it's 1x or 100x, you are taking on leverage risk. Under the same market conditions, the returns from 1x leverage and 100x leverage are worlds apart. Some may argue that the risk with 1x leverage is smaller, which is true. For Bitcoin, if you use 1x leverage, currently one contract requires over 470 USDT, and without significant price increases, you will definitely incur losses due to transaction fees, and even if there is some profit, it won't be substantial. What I want to express is that since you chose to trade with leveraged contracts, you should maximize the use of that leverage and only trade with 100x leverage. In many cases, traders use inadequate capital to engage in contracts that do not align with their current capital, with insufficient margin to support the current market, which may lead to liquidation during slightly volatile conditions. Later, when the market becomes profitable, it won’t relate to you at all, and the contracts you hold become void. Therefore, when trading perpetual contracts, as long as conditions permit, we should appropriately prepare more margin as a precaution. No matter what investment you make, there are risks involved. What we need to do is minimize those risks and then consider the benefits. Holding onto losing trades is a major taboo in contract trading; it is crucial to cut losses in a timely manner. Timely cutting of losses, combined with a position management strategy and the methods I discussed in my previous article, can minimize risks and prevent playing games with your own capital. Set a daily target for yourself; once you achieve that target, take your profits. Trading contracts will become very simple. Experienced traders know that if you have 5000 USDT as capital, is it very easy to make a profit of 50-100 USDT daily? Adding some strategies makes it even simpler. If you make 50-100 USDT a day, that amounts to 1500-3000 USDT a month! Of course, in actual operations, you may encounter significant market fluctuations or various unexpected events. Balancing it out, for a month of 30 days, as long as you meet your daily target for 20 days, you're still in profit. Having said so much, black swan events will teach lessons to all those using unreasonable leverage. These are well-known facts, but cryptocurrency contracts are different; they are not linear contracts like futures in our country but have option-like characteristics. It is necessary to separately discuss the cryptocurrency contract system and compare it with our futures market's daily price limit and no-liability settlement system: Under the daily price limit system, the maximum leverage ratio corresponds to the price limits. A single price limit can lead to liquidation without losing all your margin, though extreme liquidations can occur. However, one won't lose everything in a single day, which provides some assurance for trading strategies that involve frequent adjustments. Under the no-liability settlement system, the settlement price for the day is based on the average transaction price or the average price in the period before the market closes. Artificial manipulation cannot change the settlement price, only stop-loss orders can be triggered. Under these systems, with a reasonable leverage ratio (2-5x), I can consider futures as roughly linear, allowing for a good night’s sleep without fearing immediate bankruptcy if I look away. Cryptocurrency contracts are completely different; there are no price limits, no settlement prices, leverage and volatility don't match, and trading occurs 24/7. When market prices reach a certain point, liquidations occur, which will lead to new liquidations and stop-loss orders, draining liquidity, causing liquidity exhaustion, and creating exaggerated price spikes. Having leverage is very dangerous. Broadly speaking, for those with limited funds, all leveraged contracts are non-linear, they have absorption walls, meaning at a certain price, you must exit, which introduces non-linearity. From a financial engineering perspective, this absorption wall introduces option-like characteristics. For futures contracts, due to the existing regulations I mentioned, this option-like characteristic is not strong enough. For cryptocurrency contracts, the option-like characteristic is significantly strong, treating them as linear contracts is dangerous; they should be treated as complex option contracts. For those who cannot manage this, either avoid leverage and just buy spot, or risk it all. If it’s really not feasible, consider it as spending money on a lottery ticket.