Before answering this question, let me briefly explain what a perpetual contract is. A perpetual contract, as its name suggests, is a contract with a permanent duration. 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 premise 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 trading? Yesterday someone asked me this question, so I’m bringing it up today.
Yesterday, I discussed with a fellow trader who usually trades with 50x or 30x leverage. For Bitcoin, 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 for contracts, whether it's 1x or 100x, you carry the risk associated with leverage. Under the same market conditions, the profits generated with 1x leverage and 100x leverage are vastly different. Some may say that 1x leverage has lower risk, which is true, but for Bitcoin, if you use 1x leverage, currently one contract costs over 470 USDT. Without a significant price increase, you're definitely at a loss due to transaction fees, and even if there’s a slight profit, it won’t be substantial. What I want to express is that since you choose to trade with leveraged contracts, you should maximize the use of that leverage and only trade with 100x leverage.
What is it like in many cases? Holding thin funds to enter contracts that do not match the current capital, with little margin, cannot support the current market. This may lead to being pulled back and forth in a market, and in a slightly more volatile market, it could result in liquidation. When the profitable market comes later, it has nothing to do with you. At this point, the contracts we hold have all become invalid. Therefore, when trading perpetual contracts, under permissible conditions, we should properly prepare more of our margin, better to be safe than sorry. No matter what investment we 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 big taboo in contract trading, and timely cutting losses is very necessary.
Timely cutting losses, combined with a position-by-position risk management approach, minimizes risks. Don’t play with your own capital. Set a goal for yourself every day, and when you reach that goal, take profits quickly; trading contracts will become very simple. Friends who have been in contract trading for a long time know that if you have 5000 USDT as capital, making a profit of 50-100 USDT every day is very simple. With some methods and strategies, it becomes even easier. 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 consider compromises, in a month of 30 days, as long as you achieve your daily target for 20 days, you will still be in profit. After saying so much, I hope this can help my fellow traders.
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 solve your confusion and position traps, letting my strength do the talking. When you feel lost and don’t know what to do, pay attention to Xiao O, who will point you in the right direction.
