Before answering this question, let me briefly explain what a perpetual contract is. A perpetual contract, as its name suggests, is a contract with a perpetual renewal period. 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, under the premise of not being liquidated, if you do not actively close the position, you can hold this contract indefinitely.
So how much leverage is reasonable during operations? Yesterday someone asked me this question, so I’m bringing it up today.
Yesterday I talked with a fellow trader, and he usually uses 50x leverage or 30x leverage. Taking Bitcoin as an example, 30x leverage requires 16U, 50x leverage requires 10U, and 100x requires 5U. Under the same market conditions, my personal suggestion is to only use 100x leverage. Why?
Because once you open leverage in contract trading, whether it's 1x or 100x, it carries leverage risk. Under the same market conditions, the returns from 1x leverage and 100x leverage differ drastically. Some people might say that 1x leverage has less risk; while that is true, taking Bitcoin as an example, if you use 1x leverage, currently one contract requires over 470U. Without significant price increases, you will definitely incur losses due to transaction costs, and without large price increases, even if you make a profit, it won't be much.
What I want to express is that since you've chosen to engage in leveraged contracts, you should maximize the use of that leverage and only open 100x leverage.
In many cases, how does it look? Using thin funds to trade contracts that do not match the current capital, low margin that can't support the current market, may lead to liquidation during a slightly volatile market. When the profitable market comes afterward, it has nothing to do with you; at this point, the contracts we hold become invalid.
Therefore, when engaging in perpetual contracts, under conditions that allow it, we should appropriately prepare more margin for ourselves, better safe than sorry. Regardless of what investment we make, there are risks involved. What we need to do is to minimize those risks and then look at the profits. Holding onto a losing position is a major taboo in contract trading; cutting losses in a timely manner is very necessary.
Timely cutting losses, coupled with a position sizing approach, minimizes risk. Don’t joke with your principal; set a daily target for yourself, and once you reach it, take it. Contract trading will become very simple. Those who have been in contracts for a long time know that if you have 5000U as capital, making 50-100U daily is very simple. Adding some methods makes it even easier. If you make 50-100U a day, how much is that in a month?
1500--3000U! Of course, in actual operations, you may encounter significant market fluctuations or various unexpected situations. To compromise, if there are 30 days in a month, as long as you achieve your daily target for 20 days, you are still profitable. I hope this can be helpful to fellow traders.
In the cryptocurrency trading market, only this type of person makes money, and it doesn't depend on what technology and methods are used, but on your self-discipline. Cryptocurrency trading is sometimes not a contest of strategies but a battle of time and patience. Playing around in the cryptocurrency circle is essentially a contest between retail investors and market makers. If you don't have cutting-edge news or first-hand information, you can only be cut! If you want to layout together and harvest from the market makers, you can follow me!
Welcome like-minded people in the cryptocurrency circle to discuss!
