The experience of one fan is lamentable: clearly seeing the upward trend of ETH, but holding on in the contract for four days, losing 1000U to funding fees, and eventually liquidated; yet after closing, the market immediately soared. This is not a mistake in direction judgment, but a failure due to ignorance of the game rules—many people think contract trading only requires predicting ups and downs, but they fail to realize the rules hidden behind the candlesticks are the real 'wealth harvesters.'
Trap 1: The 'slow boiling frog' of funding fees.
Funding fees are like an 'invisible tax' in the contract market, automatically deducted every 8 hours, yet overlooked by 90% of newcomers. When the rate is positive, longs must 'supply' shorts; when the rate is negative, shorts must pay fees to longs. The most dangerous situation is when 'the direction is correct but the timing is wrong': after going long with a full position, the market goes sideways, and after several rounds of high fees, the margin is quietly eroded, leading to liquidation just when the market finally moves.
Guide to avoiding pitfalls:
Open the funding rate chart of the exchange, and avoid opening positions during periods when the rates exceed 0.1% for two consecutive rounds.
Try to keep short-term operations within 8 hours, avoiding funding settlement points.
When market sentiment is extreme (e.g., the long-short ratio exceeds 5:1), it can instead be advantageous to go against the trend to earn funding fees.
Trap 2: The 'false safe zone' of the liquidation line.
Many people calculate 'a 10x leverage drop of 10% will lead to liquidation', but end up liquidated after a 5% drop. This is because the platform's actual liquidation line includes hidden costs such as fees and slippage, which are much higher than your calculated position. Especially during periods of sharp market fluctuations, the system will trigger a 'liquidation protection' mechanism to liquidate early to avoid platform losses; at this point, your 'safety net' is actually as thin as a cicada's wing.
Breakthrough strategy:
Never operate with a full position; keep a margin buffer of over 20%.
Prioritize using the 'isolated margin mode' to avoid a single liquidation affecting the entire account.
A leverage choice of 3-5 times is advisable; high leverage may seem to offer large profit margins, but in reality, it pushes the liquidation line to the edge of a cliff.
Trap 3: The 'sweet poison' of high leverage.
The 100x leverage button is like a casino, constantly tempting newcomers with the chance to 'turn the tables' in one go. However, very few people calculate the costs: under 100x leverage, even if the direction is correct and a 10% profit is made, after deducting the two-way fees (approximately 0.2%) and several rounds of funding fees, the actual profit may only be 3%; and once the direction is wrong, a 0.5% fluctuation is enough to trigger a forced liquidation.
Clear awareness:
High leverage is only suitable for 'lightning strikes'; holding periods must not exceed 1 hour and strict stop losses must be set.
Use low leverage for 'long runs' in trending markets and high leverage for 'short plays' in volatile markets; the two cannot be reversed.
Fees and funding costs are calculated based on the 'total capital after leverage'; 100x leverage means costs are magnified by 100 times.
The essence of contract trading is a battle of understanding the rules. Those who can profit long-term are not fortune tellers predicting market trends, but 'game masters' who thoroughly understand the rules. While you are still anxious about price fluctuations, some have already profited through funding fee arbitrage and leveraging cost differences—this is why in the same market conditions, some face liquidation while others double their capital.
Remember: exchanges are never afraid of you predicting the right direction; what they truly fear is you understanding their rules. Avoid these invisible traps, and your path in contract trading can go further. Follow me for the next reveal on 'how to use rules to exploit exchange profits.'
