I see many people saying they opened 5x or 10x leverage, which is already quite small.
I really have no words. In fact, I must tell you all, you are wrong.
Leverage is not calculated this way. The leverage ratio calculated by the platform has little to do with you; it roughly affects the platform's safety ratio. You should calculate risk based on stop-loss or sufficient capital.
With the extreme volatility of crypto, open positions evenly in batches, about 10-20% of your capital each time is sufficient. The total position limit should be around 2x (short) to 4x (long) of your capital. At the same time, the overall stop-loss risk should be high at around 20% of your capital (or your psychological tolerance must be less than 20%). It is recommended that the average risk over time is 10%, which means that part of the time should be in cash... Some may ask, why still trade contracts... Hehe... I might offend the entire crypto community with this statement: do you really want to earn coins or make money? Is there a more flexible speculative tool than contracts? Is holding USDT really useless? In the face of a bear market, what is safer, coins or USDT? When you spend money, is it coins or USDT?
Dear friends in the crypto community, trading contracts (pure speculation) is completely different from investing in coins (similar to venture capital); they are two entirely different professions.
The essence of contracts is trading risk. Or rather, using risk management and expectations to make money.
When trading contracts, you must clarify this statement.
You can choose not to believe in technology, not to believe in the market makers, not to believe in candlestick charts, not to believe in BTC, and think they are all scammers. You can also choose to believe in them. These conceptual issues will not hinder you from making money.
But there is one thing you must understand: that is [risk]. What is risk? How to manage risk? How to calculate risk? How to operate with risk? How to withdraw from risk... How to survive...
------- You cannot earn money beyond your cognitive range... If you initially invest in a coin and its value doubles, you earn 100%; then if you trade contracts with 3x leverage and make a 300% profit, where does that extra money come from, and do you know who you earned it from?
—— For contract trading, what you earn is actually money from risk management, which is money given to you by others' losses and liquidations. To obtain this money, first, you must not get liquidated...
In fact, viewing the market from the perspective of [risk] is completely different from how ordinary people view the market. It's like looking at a mountain from the base versus viewing it from the peak; it's simply not the same. For example, people who buy coins can hold on and wait for a rise, enduring losses with patience... But if you are trading contracts and hold on while waiting, enduring losses, you likely won't survive the first three episodes.
Thus, operations based on [risk] management are completely different from those based on [dreams]. In the trading market, dreaming comes at a cost, while those who manage [risk] strive to take that money into their hands.
So, do you want to be a [dreamer] or a [risk manager]? It depends on yourself. However, [dreamers] should not play with contracts; trading contracts will shatter the dreams you have built over years in just a few days, and that wake-up call is too quick.
Anyone who has made significant money will have a feeling during the process: 'that time was almost like picking up money.' But—when your opportunity comes, meaning when it’s your turn to pick up money, you need to be alive and have the capital to pick up money.
Yes, making money from contracts is not difficult... After all, there are so many people giving money away by getting liquidated. They are racing on the edge of a cliff; you just need to wait at the bottom of the cliff and pick up a few parts to get by.
The difficulty lies in the fact that it is inherently against human nature. Basically, you must think contrary to ordinary people's ideas of 'getting rich overnight.' Whenever you are eager to increase your position or open a position, you need to think about what it means to 'go against human nature.'
...If buying coins is fishing, then trading contracts is stepping into the boxing ring... That's why I say spending time in cash is very normal. Waiting, testing, retreating, trying again, waiting again... this is the norm for successful speculators.
In fact, strategies over a period of time are almost always simple and straightforward, and one can say they are known to everyone.
For instance, on February 14, 2022, many teams' strategies are: shorting most coins while timing long positions on BTC as a hedge.
I won't elaborate on the reasons; just think of yourself as a big player in the crypto world and deduce from there. With such an absolutely profitable strategy, 80% of people operating contracts still won't make money.
And this seemingly simple strategy actually contains countless details. For example, the simplest operational principles, why not short directly based on BTC, why shorting is much more conservative than going long, and why the holding time is much shorter for short positions. How to handle stop-loss for shorts, how to short various technical coins... The stop-loss plan for contracts needs to be theoretical and worth studying. The value of stop-loss theory is at least worth half of what you invest in contracts. If you really can't find it, you need to derive one yourself (that's what I did; I found someone, but they were unwilling to teach, so I derived a set myself). A complete theory means a complete operation; strict execution will always provide opportunities.
Trading is like this: on the surface, it seems extremely simple, just buying and selling (one minute on stage), but behind it, countless people have put in effort (ten years of practice offstage)... Overall, this is a profession. It’s not that beginners can’t do it, but you must study and train seriously before you can actually step onto the stage.
I often compare flying a plane with speculation. The reason is that these two are quite similar. If you force yourself to fly a plane without knowing how, the result is likely to be catastrophic. If you force yourself to speculate without knowing how, you will inevitably face liquidation.
Risk management and stop-loss management are like the most basic skills of flying an airplane. With this, you can at least ensure you won't die.
Friends who are confused about trading, friends who want to recover losses, friends who want to double their money, follow Dragon Shao's lead closely and layout in advance!
