Why do contracts always lead to liquidation? It's not bad luck; you simply haven't understood the essence of trading! This article, condensing ten years of trading experience, presents low-risk rules that will completely overturn your understanding of contract trading — liquidation has never been the market's fault, but rather a ticking time bomb you've set yourself.
Three Major Truths that Disrupt 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 spot position in Bitcoin. A certain student used 20x leverage to trade ETH, investing only 2% of the principal each time, with three years of no liquidation records. Core formula: Actual Risk = Leverage Factor × Position Ratio.
Stop Loss ≠ Loss: The Ultimate Insurance for the Account
During the March 12, 2024 crash, the common characteristic of 78% of liquidated accounts: losses exceeding 5% still did not set a stop loss. 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 Open Compound Interest
Staircase Positioning Model: First position 10% for trial, increase position by 10% of profits. With a principal of 50,000, the first position is 5,000 (10x leverage), adding 500 for every 10% profit. 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 Range × Leverage Factor)
Example: With a principal of 50,000, 2% stop loss, and 10x leverage, the maximum position calculated is = 50000 × 0.02 / (0.02 × 10) = 5000.
Three-Stage Take Profit Method
① Take profit 1/3 at 20% profit ② Take profit another 1/3 at 50% profit ③ Move stop loss for the remaining position (exit below 5-day line)
In the 2024 halving market, this strategy increased a principal of 50,000 to a million during two trends, with a return rate exceeding 1900%.
Hedging Insurance Mechanism
Use 1% of the principal to buy Put options when holding positions, which can hedge 80% of extreme risks based on actual tests. During the black swan event in April 2024, this strategy successfully saved 23% of the account's net value.
Fatal Trap Data Empirical Evidence
Holding a position for 4 hours: the probability of liquidation increases to 92%
High-Frequency Trading: Average 500 operations per month resulting in a 24% loss of principal
Profit Greed: Failure to take profits in time resulted in an 83% profit drawdown of the account
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% through strict 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 use a 2% risk to capture trend dividends. Remember: control your losses, and profits will naturally flow. Establish a mechanical trading system to let discipline replace emotional decisions, which is the ultimate answer for sustained profitability.

I am Xiao O, a professional analyst and educator, a mentor and friend on your investment journey! As an analyst, the most basic thing is to help everyone make money. I will help you solve confusion and stuck positions, speaking with strength. When you lose direction and don’t know what to do, follow Xiao O and I will guide you.

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