Why do some people say not to play with contracts???
Why do some people say not to play with contracts?
Contracts are not just limited to two options of 100x and 125x.
It can easily lead to liquidations. How big of a spike could that be?
In fact, highly leveraged contracts are pure gambling.
Of course, if you are playing with a few hundred dollars, it’s not a big deal. But if you go all in with high leverage, that’s purely a suicide act.
To put it simply, contracts are meant to increase the efficiency of your capital. The cost of perpetual contracts is the funding fee, while the cost of delivery contracts is the premium. Of course, this cost could be 0 or even negative. I won’t elaborate on that here. #Bitcoin
Many people do not have their own trading systems and have a low risk tolerance. They lack strict trading discipline and like to hold onto losing positions. Therefore, they might feel that a 30% drop in spot trading is not a big issue, while a 3x contract could wipe them out. $BTC
This is completely wrong. Firstly, the ability to withstand a 30% loss indicates that you do not have strict trading discipline; you are purely gambling in the market. You might claim to be a long-term investor, but long-term investing should not involve opening contracts because there are costs and increased risks.
If you have strict stop-losses, being able to bear the loss from a wrong trade is your reason for opening contracts. #Crypto
For example, if you have 100,000, and the current price of BTC is 100,500, you believe that 100,000 is an important support level that won't be broken. If it breaks, you will stop-loss. You can bear a loss of 10,000 and are willing to risk this cost, then you might consider opening a 20x position. This way, if you're wrong, it’s within your loss limit. However, if you don’t have a stop-loss, when it drops to 95,000, you would already be liquidated and out of the market. #CryptoRich
So have you understood? When opening contracts, you must know what your maximum loss is and stay within your tolerance range. #Bitcoin
Alternatively, it could be to increase capital efficiency, knowing that we are currently in a bull market where all coins are rising and large pullbacks are unlikely.
To increase capital efficiency, it’s reasonable to use no more than 3x leverage to allocate to different coins.
