Before answering this question, let me briefly explain what a contract is. A perpetual contract, as its name suggests, is a contract that is renewed indefinitely. In the current digital currency derivatives trading market, perpetual contracts are considered a relatively new type of contract. The meaning of a perpetual contract is that, provided there is no liquidation, if you do not actively close the position, you can hold this contract indefinitely. So how much leverage is reasonable to open when trading? Someone asked me this question yesterday, so I will discuss it today.
Yesterday, I communicated with a friend in the crypto space, and he usually opens 50x leverage 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 open 100x leverage. Why? Because once you use leverage in trading, whether it is 1x or 100x, there is leverage risk involved. Under the same market conditions, the returns generated by 1x leverage and 100x leverage are vastly different. Some may say at this point that the risk of 1x leverage is smaller, which is true, but taking Bitcoin as an example, if you use 1x leverage, currently one position requires over 470 USDT. Without a significant rise, you will definitely incur losses due to transaction fees, and even if there is some profit without a significant increase, the profit will be minimal. What I want to express is that since you choose to engage in leveraged contracts, you should maximize the use of that leverage and only open 100x leverage.
In many cases, what happens is that people use thin funds to trade contracts that do not match their current capital. With insufficient margin to support the current market, you might get liquidated in a market with slight fluctuations. When a profitable market comes later, it has nothing to do with you, and at that point, the contracts you hold become invalid. Therefore, when trading perpetual contracts, if conditions allow, we should adequately prepare our margin, as it is better to be safe than sorry. Regardless of the investment we make, there is always risk involved. What we need to do is minimize that risk and then look at the benefits. Holding onto losing positions is a major taboo in contract trading; it is essential to cut losses in a timely manner.
Cutting losses in a timely manner, combined with a position management approach, minimizes risk. Do not joke with your own capital. Set a daily target for yourself; once you reach that target, take profits. Trading contracts will become much simpler. Friends who have been in contract trading for a long time know that if you have 5000 USDT as capital, making a daily profit of 50-100 USDT is quite simple. With some strategies, it becomes even easier. If you earn 50-100 USDT a day, how much is that in a month? 1500-3000 USDT! Of course, in actual trading, there may be significant market fluctuations or unexpected events. To compromise, let's say a month has 30 days; as long as you achieve your daily target on 20 days, you will still make a profit. After all this, I hope it can be helpful to fellow crypto enthusiasts.
