1. Leverage amplifies risk, easily leading to liquidation
Capital utilization ≠ risk-free: The leverage of contracts (such as 100X, 125X) can amplify profits but also significantly increase losses. For instance, under 100X leverage, a 1% price movement can wipe out the entire principal, and market 'spikes' (rapid price fluctuations in a short time) are quite common, potentially triggering liquidation within seconds, leaving no time for action.
Assuming you use 100X leverage to buy $10,000 worth of Bitcoin, if the price drops by 1%, the entire $10,000 principal is lost; however, if it were spot trading, a 1% drop would only result in a $100 loss, showing a huge difference in risk.
2. Trading costs and mechanisms increase risk
Funding fees/premiums continuously consume principal: Perpetual contracts incur 'funding fees' daily (paid between long and short positions, possibly positive or negative, but accumulate costs over long-term holding), while futures contracts may have 'premiums' (the difference between contract price and spot price), leading to higher costs the longer the position is held, which is equivalent to 'hidden losses.'
Discipline-less holding = suicide: Many people trade contracts without setting stop-losses, thinking 'a 30% drop in spot trading is fine,' but under leveraged contracts, a 30% fluctuation can directly bring the principal to zero (for example, with 3X leverage, a 33% drop leads to liquidation), and while holding a position, they may also be forced to cut losses due to margin call pressure.
3. Most people lack a trading system and discipline
Treating contracts as gambling: Under high leverage, short-term market fluctuations are highly random, and many people go all-in without understanding the rules; essentially, it's gambling on price movements rather than rational trading. For example, believing that 'support will not break' and going all-in long, once it breaks, they face liquidation without considering their risk tolerance.
Long-term investment is not suitable for contracts: Long-term investment should ignore short-term fluctuations, but contracts come with holding costs (funding fees, premiums), and if held long-term, price fluctuations plus cost accumulation result in risks far exceeding spot trading, potentially leading to 'gaining in price but losing money.'
4. Prerequisites for reasonable contract trading
If one must trade contracts, it is essential to meet: clearly define the maximum loss range: for instance, with a $100,000 principal, being able to bear a $10,000 loss, then calculate the position based on leverage (e.g., with 20X leverage, the maximum position is $5,000, and a 20% drop triggers a stop-loss, resulting in exactly a $1,000 loss).
Low leverage + strict stop-loss: Leverage should not exceed 3X, and every trade must have a stop-loss set, never holding positions, treating contracts as a tool to 'increase capital utilization' (e.g., light long positions in a bull market) rather than a 'get-rich-quick scheme' for gamblers.
Contracts are essentially tools for professional traders to hedge risks or optimize capital efficiency, but for ordinary players, high leverage, trading costs, and market volatility can turn it into a 'graveyard for gamblers.' Without a mature trading system, strict discipline, and risk tolerance, trading contracts, especially with high leverage, is nearly equivalent to 'gambling' with the principal; liquidation is just a matter of time.
