Attention all who have experienced total liquidation of contracts! Here’s some valuable information!
Why do contract traders always face liquidation? It's not bad luck; it’s because you haven't understood the essence of trading! This article distills ten years of trading experience into low-risk rules that will completely overturn your perception of contract trading — liquidation is never the market’s fault, but rather a time bomb you set yourself.
Three truths that overturn perceptions
Leverage ≠ risk: position size is the lifeline
Using 1% position with 100x leverage, the actual risk is only equivalent to 1% of a full position in Bitcoin. A certain student used 20x leverage on ETH, investing only 2% of the principal each time, with three years of no liquidation. Core formula: real risk = leverage ratio × position size.
Stop loss ≠ loss: the ultimate insurance for the account
In the 2024 March 12 crash, the common feature of 78% of liquidated accounts: losses exceeding 5% without setting stop losses. Professional traders' iron rule: a single loss must not exceed 2% of the principal, equivalent to setting a 'circuit fuse' for the account.
Rolling positions ≠ all-in: the correct way to compound interest
Stepwise position building model: first position 10% for trial and error, add 10% of profits for additional positions. For a principal of 50,000, the initial position is 5,000 (10x leverage). Each time there’s a 10% profit, add 500. When BTC rises from 75,000 to 82,500, the total position only expands by 10%, but the safety margin increases by 30%.
Institution-level risk control model
Dynamic position formula
Total position ≤ (principal × 2%) / (stop loss margin × leverage ratio)
Example: 50,000 principal, 2% stop loss, 10x leverage, calculate maximum position = 50000 × 0.02 / (0.02 × 10) = 5,000
Three-tier take profit method
① Close 1/3 of the position at 20% profit ② Close another 1/3 at 50% profit ③ Move the stop loss for the remaining position (exit if it breaks the 5-day line)
In the 2024 halving market, this strategy increased a principal of 50,000 to over a million during two trends, with a return rate of over 1900%
Hedging insurance mechanism
Use 1% of the principal to buy Put options when holding positions, which has been tested to hedge 80% of extreme risks. In the April 2024 black swan event, this strategy successfully preserved 23% of the account’s net value.
Empirical data on fatal traps
Holding a position for 4 hours: the probability of liquidation increases to 92%
High-frequency trading: an average of 500 operations per month results in a 24% loss of principal
Profit greed: failing to take profits in time leads to a withdrawal of 83% of the account's profits
IV. Mathematical expression of the essence of trading
Expected profit = (win rate × average profit) - (loss rate × average loss)
When setting a 2% stop loss and a 20% take profit, only a 34% win rate is needed to achieve positive returns. Professional traders achieve an annualized return of over 400% by strictly adhering to stop losses (average loss of 1.5%) and trend capturing (average profit of 15%).
Ultimate rule:
Single loss ≤ 2%
Annual trades ≤ 20
Profit-loss ratio ≥ 3:1
70% of the time in cash waiting
The essence of the market is a game of probabilities; smart traders risk 2% to seize trend dividends. Remember: control your losses, and profits will run. Establish a mechanical trading system to let discipline replace emotional decision-making, which is the ultimate answer to sustained profitability.
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