Especially under high leverage, risks can be greatly amplified.
This can be understood from the following aspects:
1. Leverage amplifies risk and can easily lead to liquidation.
Capital utilization does not equal no risk: The leverage of contracts (like 100X, 125X) can amplify profits, but it also amplifies losses. For example, under 100X leverage, a 1% price fluctuation can wipe out the principal. Market 'spikes' (significant price fluctuations in a short time) are common and may trigger liquidation within seconds, leaving no time to react. Assume buying $10,000 worth of Bitcoin with 100X leverage; if the price drops by 1%, the entire $10,000 principal is lost. However, in spot trading, a 1% drop only results in a $100 loss, showing a vast difference in risk.
2. Trading costs and mechanisms increase risks.
Funding fees/premiums continuously consume the principal:
Perpetual contracts charge a 'funding fee' daily (paid back and forth between longs and shorts, which can be positive or negative, but costs accumulate over the long term), and delivery contracts have a 'premium' (the price difference between the contract and the spot price). The longer the position is held, the higher the cost, equivalent to 'hidden losses'. Holding without discipline is equivalent to suicide: Many people trade contracts without setting stop losses, thinking 'it's fine if the spot drops 30%', but under contract leverage, a 30% fluctuation can directly reduce the principal to zero (for example, with 3x leverage, a 33% drop results in liquidation), and holding the position may force one to cut losses due to margin call pressures.
3. Most people lack a trading system and discipline.
Treating contracts as gambling:
Under high leverage, short-term market fluctuations are highly random. Many people go all-in without understanding the rules, essentially betting on price movements rather than making rational trades. For example, believing that 'the support level won't break' leads to opening a full position long. Once the level breaks, it can lead to liquidation, without considering risk tolerance at all. Long-term investment is not suitable for contracts: Long-term investments should ignore short-term fluctuations, but contracts have holding costs (funding fees, premiums), and if held long-term, price fluctuations plus cost accumulation result in a far higher risk than spot trading, and one could even 'make a profit in the market but lose money'.
4. The premise of playing contracts reasonably.
If one must play contracts, the following must be met:
Clarify the maximum loss range: For example, with a $100,000 principal, if you can tolerate a $10,000 loss, calculate the position based on leverage (e.g., 20x leverage means a maximum position of $5,000; if it drops 20%, it triggers a stop loss, resulting in a $1,000 loss). Low leverage + strict stop loss: Leverage should not exceed 3x, and every trade must have a stop loss set; never hold onto a losing position. Treat contracts as tools to 'improve capital utilization' (like going long with a light position 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, factors like high leverage, trading costs, and market volatility can turn it into a 'grave for gamblers'.
If there is no mature trading system, strict discipline, and risk tolerance, trading contracts, especially with high leverage, is almost equivalent to 'gambling' with the principal, and liquidation is just a matter of time.
