Think of perpetual contracts as a 'game that never ends'.
In general investments, like buying a financial product, there’s always a maturity date. But perpetual contracts are different; they’re like a game you can join and leave at any time. As long as your capital (the 'margin') isn't completely lost, you can play as long as you want. What are you betting on? Whether a certain coin will rise or fall in the future.
What does 'leveraging' mean? It means borrowing money from the dealer to increase your bet.
This part is key, and also the most dangerous.
Suppose you have 10 dollars and feel the game isn’t exciting enough. At this point, the dealer (exchange) says: 'No problem, I’ll lend you 990 dollars so you can play with 1000 dollars. If you win, it's yours; I’ll just take a bit of interest.' This is '100x leverage'.
What are the benefits? Originally, if the price goes up by 1%, your 10 dollars can only earn 0.1 dollars. Now, if you play with 1000 dollars, the same 1% increase means you can earn 10 dollars! Exciting, right? This is why that friend in the original text liked 100x leverage; he feels that once you're at the table, you should play big.
What are the downsides? Fatal downsides! If the price drops by 1%, your 1000 dollars loses 10 dollars. This lost money will be directly deducted from your own 10-dollar principal. Your principal is instantly wiped out, and you’re kicked out of the game; this is called 'liquidation' or 'forced closing'. Even if the price rises back in the next second, it doesn't matter to you anymore because you're already out.
Give some life-saving advice to friends who want to join the game.
In perpetual contracts, staying alive is more important than anything else.
Keep some extra money in your pocket: The more spare cash you have, the less likely you are to get kicked out due to minor fluctuations. Don't use all your savings to play.
Set a 'loss limit': Before entering, think about the maximum amount you can lose before you stop playing (stop loss). Leave when you hit that limit, don't stubbornly hold on; the market doesn’t recognize tears.
Don't put all your eggs in one basket: Use 'warehouse mode'. It's like having several small wallets, using one for each game. Losing everything in game A doesn't affect the money in game B.
Win and run, take the money and be safe: Set a small goal for yourself, like if you earn 100 dollars today, then stop. Greed is the devil; knowing when to take profits will help you survive longer.
In short, perpetual contracts are a battleground for professional players and a tool that can quickly increase or zero out your wealth. Beginners must be cautious; start with small amounts to understand the rules, and don't jump in thinking about going all in right away.
