Before answering this question, let me briefly explain what a perpetual contract is. A perpetual contract, as the name suggests, is a contract that can be renewed indefinitely. In the current cryptocurrency 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 when trading? Someone asked me this question yesterday, so I will discuss it today.
Yesterday, I was talking with a fellow trader, and he usually trades with 50x or 30x leverage. Taking Bitcoin as an example, 30x leverage requires 16 USDT, 50x leverage requires 10 USDT, and 100x requires 5 USDT. In the same market conditions, my personal suggestion is to only use 100x leverage. Why? Because once you open leverage in trading, whether it is 1x or 100x, you are exposed to leverage risk. In the same market conditions, the returns generated from 1x leverage and 100x leverage are vastly different. Some people might say that 1x leverage has lower risk, which is correct. Taking Bitcoin as an example, with 1x leverage, you need over 470 USDT for one contract. If there is no significant price increase, you will definitely incur losses, as the cost of transaction fees is there, and even if there is a slight profit, it won’t be much. What I want to express is that since you have chosen to trade with leveraged contracts, you should maximize the use of this leverage and only open 100x leverage.
In many cases, what happens is that traders use insufficient funds to trade contracts that do not align with their current capital. With insufficient margin, they cannot support the current market, which may result in liquidation during slightly larger fluctuations. When a profitable market comes later, it has nothing to do with you, and at this point, the contracts you hold become invalid. Therefore, when trading perpetual contracts, if conditions allow, we should prepare slightly more margin as a precaution. Regardless of what investment you make, there are risks involved. What we need to do is minimize those risks and then look at the potential gains. Holding onto losing positions is a big taboo in trading contracts; it is very necessary to cut losses in a timely manner.
Cutting losses in a timely manner, combined with a position-by-position approach, minimizes risk. Do not joke with your own principal. Set a daily goal for yourself; when you reach the target, take your profits promptly. Trading contracts will become very simple. Those who have been in contact with contracts for a long time know that if you have 5000 USDT as capital, making a profit of 50-100 USDT daily is quite simple. Adding some methods makes it even easier. If you earn 50-100 USDT a day, how much is that in a month? 1500-3000 USDT! Of course, in actual operations, you may encounter significant market fluctuations or various unexpected situations. To compromise, let’s say, in a month of 30 days, as long as you achieve your daily goal for 20 days, you will still be in profit. After saying so much, I hope this can be helpful for fellow traders.
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