Why do some people say that trading cryptocurrencies with contracts is not advisable?
Contracts are not just limited to 100x and 125x options.
It’s easy to get liquidated with just a small spike. What a huge spike!
In fact, high-leverage contracts are pure gambling.
Of course, if you play with a few hundred dollars, it's not a big deal. But if you go all in with high leverage, that's purely a suicidal act.
To put it simply, contracts are meant to increase your capital utilization. The cost of perpetual contracts is funding fees, while the cost of delivery contracts is the premium. Of course, this cost can be 0 or even negative. I won’t elaborate on that here. #比特币
Many people don't have their own trading systems and have poor risk tolerance. They lack strict trading discipline and prefer to hold onto losing positions. So they feel that losing 30% in spot trading is not a problem, but they might lose everything in a 3x contract. #BTC
This is completely wrong. First of all, being able to tolerate a 30% loss indicates that you lack strict trading discipline and are purely gambling in the market. You might say you're a long-term trader, but in that case, you shouldn't open contracts as there are costs and increased risks involved.
If you have strict stop-losses, being able to tolerate the loss from a wrong position is your reason for opening a contract. #币圈
For example, if you have 100,000, and the current price of BTC is 100,500, you believe that 100,000 is an important support level and will not break. If it does break, you will stop-loss. The loss you can tolerate is 10,000, and you’re willing to take that risk, you could consider opening a 20x position, to gamble, this way, if it goes wrong, it’s still within your loss limit. However, if you don't have a stop-loss, then when it drops to 95,000, you will have been liquidated and lost everything.
So, do you understand? When opening a contract, you must know what your maximum loss is and stay within your tolerance range.
Alternatively, if it's to improve capital utilization, and you know it's a bull market where all cryptocurrencies are rising, making big corrections is not likely.
Then, to improve capital utilization, it's reasonable to use no more than 3x leverage to allocate across different cryptocurrencies.
