Before answering this question, let me briefly explain what perpetual contracts are. A perpetual contract, as its name suggests, is a contract that is renewed indefinitely. In the current digital currency derivatives trading market, perpetual contracts are considered a relatively new type of contract. The meaning of a perpetual contract is that, provided you don't get liquidated, if you don't actively close your position, you can hold this contract permanently. So how many times should you reasonably multiply your position when operating? Someone asked me this question yesterday, so I will discuss it today.
Yesterday, I exchanged ideas with a fellow trader. He usually uses 50x leverage or 30x leverage. Taking Bitcoin as an example, 30x leverage requires 16U, 50x leverage requires 10U, and 100x requires 5U. In the same market condition, my personal suggestion is to only use 100x leverage. Why? Because once you open leverage in contracts, whether it's 1x or 100x, you carry leverage risk. In the same market condition, the returns generated by 1x leverage and 100x leverage are worlds apart. Some might say that 1x leverage carries less risk, which is true; however, taking Bitcoin as an example, if you use 1x leverage, currently one contract requires over 470U. Without significant price increases, you will definitely incur losses due to transaction costs. Even if there isn't a big price increase, even if you make a profit, it won't be substantial. What I want to express is that since you have chosen to use leveraged contracts, you should maximize the use of this leverage and only use 100x leverage.
In many cases, what happens is that you use thin capital to engage in contracts that do not match your current capital. With little margin, you cannot support the current market, which may get pulled back in the market. In a slightly more volatile market, you could get liquidated, and when a profitable market comes later, it has nothing to do with you. At that time, the contracts we hold would be invalid. Therefore, when engaging in perpetual contracts, as long as conditions allow, we should adequately prepare our margin, as it is better to be safe than sorry. No matter what investment you make, there is risk involved. What we need to do is minimize risk and then look at profits. Holding positions is a big taboo in contract trading; timely cutting losses is very necessary.
Timely cutting losses, combined with a gradual warehouse model and the methods I wrote about in my previous article, minimizes risk. Do not joke with your own capital. Set a daily goal for yourself; once you achieve it, take profits promptly, and contracts will become very simple. Those who have dealt with long contracts know that if you have 5000U as capital, making a profit of 50-100U daily is quite simple. Adding some methods makes it even easier. If you make a profit of 50-100U a day, how much is that in a month? 1500--3000U! Of course, in actual operations, you may encounter significant market fluctuations or various unexpected events. If we consider a compromise, in a month with 30 days, as long as you achieve your daily goal for 20 days, you are still profitable. Having said so much, I hope this can help fellow traders.
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