The risk of 'holding positions' in contract trading is more pronounced than in ordinary spot trading, as contracts usually come with leverage that amplifies profit and loss effects. Here are the core risks of contract holding, explained in the context of leverage characteristics:
1. The risk of liquidation increases dramatically, and the principal may become zero.
• Contract trading inherently involves leverage (such as 10x, 100x), and small price fluctuations can amplify losses. For example, under 10x leverage, if the position direction is wrong, a 10% reverse price movement will wipe out the margin and trigger liquidation, resulting in a direct loss of principal.
• If extreme market conditions occur while holding a position (such as spikes or one-sided surges or drops), it may lead to 'liquidation' due to insufficient liquidity, resulting in not only a loss of principal but potentially owing funds to the platform.
2. Loss of capital utilization, while also needing to pay additional fees.
• Funds are locked in losing positions during holding, unavailable for other trading opportunities, leading to higher opportunity costs.
• Some contract platforms may charge a 'holding fee' (such as the funding rate for perpetual contracts), the longer you hold the position, the more additional fees accumulate, further eroding the principal.
3. Leverage stacking leads to exponentially increasing risks.
• If you 'add to your position' during the holding process to dilute costs, it will further increase the leverage ratio. For example, if you initially hold a position with 10x leverage, adding to your position may raise the leverage to 20x, at which point a 5% price reversal could lead to liquidation.
• The higher the leverage, the lower the tolerance for errors in market judgment; holding a position essentially involves using 'high risk' to bet on a 'low probability' reversal, which will inevitably lead to losses in the long run.
4. Loss of emotional control leads to a series of errors.
• During contract holding, the account assets may fluctuate significantly in a short time, easily triggering emotions such as panic and recklessness.
◦ Delaying stop-losses due to unwillingness to face losses leads to a snowballing effect of losses;
◦ Blindly opening opposite positions to recover losses, falling into the trap of 'dual-direction losses'.
5. Market manipulation risks are more easily exposed.
• In niche cryptocurrencies or low liquidity contracts, during holding, you may be 'maliciously liquidated' by dominant funds (e.g., through large orders pulling up or crashing the price), making it difficult for ordinary traders to counter this risk.
Comparing spot holding: What is the 'lethality' of contract holding?
Holding spot positions (such as being stuck in stocks) at least involves holding real assets, and you might wait long-term to break even; however, the essence of contract holding is 'betting on short-term direction', and leverage and time costs accelerate risk exposure, with no logic for 'long-term holding'—after all, contracts have expiration dates, or may end early due to liquidation.
Recommendations
The core of contract trading is 'risk management', not holding positions:
• Strictly set stop-losses (such as forced liquidation at 5% - 10% losses), not holding positions is the bottom line;
• Control the leverage ratio (recommended below 5x) to avoid excessive exposure of funds;
• Reject the temptation to 'add to the position to dilute costs', if wrong, accept the loss; preserving the principal is essential to continue trading.$BTC #以色列伊朗冲突 #MichaelSaylor暗示增持BTC
