The biggest difference between contracts and spot trading is leverage. For example, on January 3, 2024, when news broke that the Bitcoin ETF would not pass, BTC dropped sharply by 10%, and many altcoins fell by 20%. At this moment, if you bought Bitcoin with 10x leverage, you would have been liquidated. However, BTC later rose back to 45,000 on January 8, which has nothing to do with you anymore. If you held the spot, it’s clear that the drop was much less than the drop in your A-shares that day. Therefore, with contracts, you are earning money from short-term volatility. Holding contracts long-term may lead you to pay high funding rates. The fundamental reason you engage in contracts is that you want to trade short-term and make a big profit before running away.

Hello everyone, I am Brother Liang. After experiencing multiple market cycles, I have rich market experience in various financial fields. Follow Brother Liang to penetrate the fog of information and discover the real market. Seize more opportunities for wealth codes and find truly valuable opportunities, don’t miss out and regret later!

Basic concepts you need to understand before making contracts

Isolated margin, cross margin, funding rate, long/short ratio, leverage position limits, what multiple leverage to use for trading, contract open interest, how to calculate fees, etc. If you don’t understand, you can search for it on Baidu; the content is quite basic, so I won’t expand on it here.

Returning to my own trading system.

I mainly do intraday trend trading, focusing on trend investments based on the 15-minute chart. This is something that those who are used to T0 trading in stocks generally do; it’s actually not too difficult. Find the right leverage for yourself on this trend and execute high-win-rate trades frequently. Over time, the power of compound interest will come. Sometimes I might execute hundreds of trades in a single day. Therefore, it's important to find platforms that offer rebates; you can use my referral code for a high rebate rate. I remember a wave of ORDI and SOL in December that grew my account from 400,000 to over 700,000. ORDI had significant volatility, earning me a total of 7,000, with the total number of trades each day reaching several hundred, and my highest single-day profit being $18,000.

My approach is 'small positions, large volumes, selecting those with high trading volume and strong market bullish sentiment.' After all, insufficient volatility and low profits per trade lead to excessive trading, resulting in high fees. Then, on the night of January 3, there was a wave of volatility; Bitcoin spot trading had negative news, leading to a direct 20% drop in all altcoins, with ORDI dropping more than 20%. I faced my first single-day loss exceeding 10,000, close to -$12,000. At that time, I summarized my problem: I hadn’t strictly set a stop-loss. In the following days, I achieved my first single trade profit exceeding 10,000 (Ethereum), and later managed to capitalize on the second wave of Pepe’s rise.

Make sure to set a stop-loss immediately after placing a contract order.

Cryptocurrencies can spike or drop drastically due to one or two pieces of news, with many examples of both long and short liquidations. Plus, trading occurs 24 hours a day, which means you can be liquidated while you sleep, so it’s crucial to develop the habit of setting stop-losses. I generally engage in trend trading; if a trend trade goes wrong, definitely don’t hold onto it because sometimes, once a consensus is established, there are many cases where the price rises or falls 100%. No matter how much money you have, you can't hold on. Just look at TRB in December; it rose from 120 to over 700 in ten trading days without any retracement. If you shorted, even with 0.5x leverage, you would have been liquidated long ago. So don’t wait until one day you are liquidated to realize the importance of stop-losses.

Definitely do not gamble.

Never have any lucky mindset, because you are dealing with contracts. Even if you are right nine times out of ten, as long as you make a mistake once and stubbornly hold on, you will 100% be liquidated. Being liquidated has a huge impact on your confidence and mindset. Therefore, I suggest that whenever a contract incurs a loss exceeding 30%, you should close the position and take a break to reflect on whether you made a mistake. A 20% fluctuation in the cryptocurrency market within two days is very normal; you will encounter it daily. So if you want to defeat the market in the long term, you need to avoid factors that could lead to your failure.

If you are new to the cryptocurrency space and your total assets exceed 20% in digital currencies, please withdraw that proportion to below 10%. Otherwise, this volatility will keep you awake at night and affect your trading.

To reduce the risk of liquidation, the following strategies can be implemented.

1. Reasonably control leverage multiples.

All leveraged traders should keep in mind: the higher the leverage, the greater the risk. For novice traders, it is strongly recommended to use no more than 3x leverage to avoid excessive risk amplification.

For example: if the account fund is 1,000 USDT, using 3x leverage allows you to control a position of 3,000 USDT, compared to 10x leverage of 10,000 USDT, which carries less risk. Earning less is fine, as long as you preserve your principal.

2. Set stop-loss levels in advance.

Stop-loss is a crucial risk control tool to avoid liquidation. Traders can set a stop-loss price when opening a position.

For example: when going long on BTC at 100,000 USDT, the stop-loss can be set at 98,000 USDT (a loss of 2%). If the market price drops to this level, the system will automatically close the position to limit losses.

3. Maintain sufficient margin.

When market volatility increases, maintaining a higher margin ratio can effectively reduce the risk of liquidation. For instance: if the exchange's maintenance margin rate is 0.5%, it is advisable to prepare at least 3-5 times additional funds as a buffer. Additionally, when the price approaches the liquidation point (upon receiving liquidation notifications), timely add margin to ensure the account funds are sufficient and reduce position risk.

4. Observe the market liquidation heatmap.

Through the liquidation heatmap, you can observe which price ranges have a large number of liquidations and predict potential areas of severe price fluctuations. Investors can adjust their entry and exit plans based on this data to avoid entering high-risk zones.

For example: if the heatmap shows a large number of liquidation orders between 100,000 and 98,000 USDT, this indicates that this range may become market support or resistance.

5. Diversify investments to reduce the risk of a single position.

Do not put all your funds into a single position; instead, spread them across different trading pairs or reduce the leverage of a single trade. This way, even if one trade gets liquidated, some funds will remain unaffected.

For example: if you have 5,000 USDT, you could allocate 2,500 USDT to BTC and 2,500 USDT to ETH to reduce the impact of market volatility. It’s important to note that cryptocurrencies often experience simultaneous market downturns, so this strategy may not always be effective. However, a reasonable allocation between altcoins and mainstream coins helps to reduce risk.

It can be observed that this significant drop affected even the top five major coins like ETH and SOL, with drops exceeding 30% from their highs. This suggests that leverage exceeding 3x could lead to liquidation, which is also why we mentioned 'liquidations in bull markets' in earlier articles.

6. Pay attention to market trends and major events.

Market news, macroeconomic data, policy changes, etc., can all affect Bitcoin prices. Events like the FOMC meeting or the release of CPI data often lead to significant market fluctuations, and approval or rejection of ETFs or regulatory policy changes can also impact market confidence.

Investors should closely monitor these key events and adjust their positions accordingly to reduce the risk of liquidation caused by severe market fluctuations!

While leveraged trading can amplify profits, it also amplifies risks. Although it's encouraged to avoid a gambling mindset and focus on studying projects and holding spot assets, if you still want to trade with leverage, understanding the mechanics of positions and liquidations is very important.

Through reasonable leverage control, stop-loss setting, maintaining sufficient margin, observing market heatmaps, and diversifying investments, you can effectively reduce the likelihood of liquidation.

If you are a novice cryptocurrency trader or encountering contracts for the first time, although the leverage limits of exchanges may seem enticing, it is still recommended to start with low-leverage trading and learn to observe market trends and manage risks to avoid massive losses due to leverage, ultimately leading to a market exit!

Taboos in the cryptocurrency space:

1. Do not borrow money to trade cryptocurrencies. Do not borrow money to trade cryptocurrencies. Do not borrow money to trade cryptocurrencies.

If you borrow money to trade cryptocurrencies, it shows you have a gambling mindset, and you will end up with nothing.

2. Do not go all in on leverage. Do not go all in on leverage. Do not go all in on leverage.

Leverage + going all in leads to a gambling mentality, and you will end up with nothing.

3. Do not trade on small platforms; most small platforms are internal markets.

Internal markets mean drawing K-lines; your money does not enter the market but goes into the account of that shell company.

The game rules dictate that the majority of leverage outcomes end in zero. The capital behind loves to watch a group of retail investors go all in because the next second, the money falls into their pockets!

What if? What if going all in wins?

This market is a battle of wits against the market makers; principles combined with patience are necessary to eat others' profits. It is inherently not a fair game.

If you happen to win by going all in, it’s even scarier; you might think you are a god. After the first win, there will be countless more wins, and the money you earn will eventually go back in.

As for those myths of sudden wealth, just listen to them. As a certain expert said, this world is just a makeshift stage; where do so many myths come from!

If the price moves sideways and suddenly drops, it will be a minor drop; after the drop, it will rise. If the price moves sideways and suddenly rises, it will be a minor rise; after the rise, it will drop.

Sideways movement is a state of accumulation at the bottom. There is a question I have not addressed before: why do market makers prefer sideways accumulation?

When market makers begin accumulating at the bottom, the continuous buying of shares increases market buying power, thus reducing the available shares, leading to a rise in price.


Therefore, once the market makers enter the market, the price will no longer hit new lows. This statement is very important.

Why choose the sideways mode for accumulation?

Sideways price fluctuations are small, and retail investors will automatically exit when they do not see profits for a long time, allowing market makers to quietly collect cheap shares at the bottom.

Even if I tell you that these shares are very cheap and you won’t see any profits for a year, can you bear it? Very few retail investors can endure it.

There are some short-term speculators or funds in the market. To prevent giving these short-term speculators opportunities for manipulation, sideways movement is the most effective defensive formation.

Sideways movement doesn't have huge fluctuations, making it hard to attract retail investors' attention. Often when you notice it, the price has already hit the ceiling.

These are the advantages of sideways movement. After a period of sideways movement, when the market makers have accumulated a certain amount of shares, the sideways pattern will start to shift into a choppy mode, which is the back and forth fluctuations, aiming to shake off the unstable shares. Once the unstable shares are collected, the market makers will have reached their accumulation goals, and the next step is to rise.

Thus, after sideways movement, there will be choppy action. If it moves down, it cannot be a major drop; if it dips below the market maker's cost price, it will be a major incident. Therefore, if there is a sudden drop after moving sideways, it must be a minor drop, aimed at shaking off the weak hands.

The opposite is also true.

If there has been sideways movement for a while and suddenly it rises, it indicates that a signal for a choppy wash is initiated. If it rises directly without choppiness, it does not make sense (unless it’s speculative funds that take one shot and leave). The shares are in the hands of every holder, and the daily natural flow of those volumes is simply insufficient; only through choppiness can the market be stirred, accelerating the flow of shares and achieving rapid accumulation.

Even if it rises, it must rise while moving sideways; one reason is to shake off speculative positions, and another is to sell high and buy low.

Of course, some market makers will also adopt a model of first choppiness and then sideways movement, with the purpose being the same.

Sideways movement is for quietly collecting shares, while choppiness is for further collecting unstable shares.

In fact, sideways movement and choppiness are mutually inclusive; regular fluctuations within a range also belong to sideways movement. There is no absolute sideways movement; a straight line cannot be horizontal, so the concept of sideways movement is broad.

This is a piece of advice targeted again at newcomers to the cryptocurrency space (it needs to be engraved in your mind).

1: Do not trade while in debt; trading in cryptocurrencies while in debt is overextending yourself. This is the most important.

2: Interact more with experienced individuals in the cryptocurrency space.

3: Consider spending a little money to join some paid groups, choose whom to follow at your discretion, as long as you believe that this blogger is reliable and can truly teach you something, and learn their trading ideas.

4: Do not buy hot coins.

When a coin is at its hottest, or when the market is frantically CX-ing a certain coin, it is usually nearing the end. At this point, if you have already held this coin, consider exiting. If you do not hold this coin, it is best not to enter, as there is a 90% chance you are just taking over the position.

5: Do not trade on small exchanges; small exchanges are at risk of disappearing at any time, or pulling the plug, rendering all your funds inaccessible.

6: Understand what are low-quality altcoins and mainstream coins: Low-quality altcoins are those gambling on the blockchain; due to their low market capitalization, they experience significant price fluctuations, easily multiplying by dozens or even hundreds. However, the risks are equally high, and the potential losses are also substantial. Mainstream coins are those like Bitcoin, Ethereum, and Solana.

7: Understand what are primary and secondary markets. Coins that you can buy on all exchanges are in the secondary market. Primary market refers to on-chain transactions made on decentralized exchanges or WEB3 wallets; it is not advisable for newbies to participate in primary markets as it is easy to fall victim to scams with coins like Pi.

8: Understand left-side trading and right-side trading. Left-side trading occurs when the market direction is not yet clear, buying below and selling above, primarily using limit orders. For example, trying to catch a bottom during a decline, believing this position will stop the drop. This method carries relatively high risk. Right-side trading means waiting for the market to establish a direction, such as when the price starts to rebound or breaks through/below critical levels, then entering. This is chasing the trend, which is safer but may not allow you to capture the initial price movement.

9: You should pay attention to bloggers who share experiences rather than those who promote brainwashing or declare wealth generation.

10: Do not trust anyone who approaches you saying they can help you make money!

11: Continuously learn knowledge. A person cannot earn money beyond their understanding; even if you earn a lot initially, if your understanding does not match, you will quickly lose it back, and you may also face significant losses. You must keep learning to improve your understanding! I hope every newcomer to the cryptocurrency space can avoid detours. Although you will encounter various setbacks and losses, these are things you need to face to grow quickly!

Trading in the cryptocurrency space is essentially a contest between retail investors and market makers. If you do not have cutting-edge information or firsthand data, you can only be taken advantage of! If you want to layout together and harvest from market makers, you can follow Brother Liang. Welcome like-minded individuals in the cryptocurrency space to discuss together.

There is a saying I strongly agree with: the boundary of knowledge determines the boundary of wealth; a person can only earn wealth within the limits of their knowledge.

Your mindset while trading cryptocurrencies must be good; during significant drops, do not let your blood pressure soar, and during major rises, do not get carried away; securing profits is paramount.

Those who do not have many resources should be steady; this is an unbreakable way of survival.

Giving roses to others leaves a lingering fragrance in your hand. Thank you for your likes, follows, and shares! Wishing everyone financial freedom by 2025!#美国加征关税 $BTC