Before answering this question, let me briefly explain what a perpetual contract is. A perpetual contract, as the name suggests, is a contract that is indefinitely extended. 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, under the condition of not being liquidated, if you do not actively close your position, you can hold this contract indefinitely. So how much leverage is reasonable to use when operating? Someone asked me this question yesterday, so I will talk about it today.
Yesterday, I was communicating with a friend in the crypto community, and he usually uses 50x leverage or 30x leverage. For Bitcoin, using 30x leverage requires 16 USDT, 50x leverage requires 10 USDT, and 100x requires 5 USDT. Under the same market conditions, my personal suggestion is to only use 100x leverage. Why? Because once you use leverage in contracts, whether it's 1x or 100x, there is leverage risk involved. Under the same market conditions, the returns generated by 1x leverage and 100x leverage are vastly different. Some might say that the risk with 1x leverage is smaller, which is true. For Bitcoin, if you use 1x leverage, currently one contract requires over 470 USDT. Without significant price increases, you are definitely losing money due to transaction fees, and even if there are slight profits, they won't amount to much. What I want to express is that since you've chosen to trade with leveraged contracts, you should maximize the use of that leverage and only use 100x leverage.
In many cases, what happens is that people use thin capital to trade contracts that do not match their current funds. With insufficient margin to support the current market, you might get liquidated in a slightly volatile market. When a profitable market comes afterward, it has nothing to do with you, and the contracts you hold become invalid. Therefore, when trading perpetual contracts, under permissible conditions, we should appropriately prepare more margin for ourselves. Better safe than sorry. No matter what investment you make, there are risks involved; what we need to do is minimize those risks and then look at the benefits. Holding onto losing positions is a major taboo in contract trading; cutting losses in a timely manner is very necessary.
Cutting losses in a timely manner, combined with a position-by-position approach, minimizes risk. Do not joke with your own capital. Set a daily target for yourself, and when you achieve that target, take profits. Trading contracts will become very simple. Friends who have been in contact with contracts for a long time know that if you have 5000 USDT as capital, making a profit of 50-100 USDT a day is very simple. With some methods, it becomes even simpler. If you make 50-100 USDT a day, how much is that in a month? 1500-3000 USDT! Of course, in actual operations, you may encounter significant market fluctuations or various unexpected events. If we average it out, in a month with 30 days, as long as you achieve your daily target for 20 days, you are still making a profit. After saying all this, I hope it can be helpful to everyone in the crypto community.
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