Thinking of trying contract trading? Please hit the 'pause button' first! As one of the highest-risk activities in the crypto space, it is definitely not a 'beginner's choice'. This article only discusses basic knowledge, hard-learned lessons, and risk limits, with no investment advice throughout—be sure to conduct thorough research before entering the market, accurately assess your risk tolerance, and then decide whether to step into this field!💥
🔍 One, basic knowledge enlightenment: understand the rules before discussing operations.
The core logic and mechanism of contract trading is the first hurdle that newcomers must overcome; not understanding the rules is equivalent to 'blindly gambling'.
Contract types: perpetual vs. delivery, newcomers must choose the right starting point.
The most common contract type for newcomers is perpetual contracts. They do not have a fixed expiration date, so there is no need to worry about forced liquidation at expiration. The operation is relatively simple, but 'no expiration date' also means the risk will continue to exist; as long as you hold a position, you must face market fluctuations.
Contract trading has a clear settlement date (such as weekly or monthly), and after expiration, it will be settled at the agreed price. You need to pay attention to both the market and the settlement time nodes, making the mechanism more complex. It is advisable for newcomers to familiarize themselves with perpetual contracts before considering trying contract trading.
Leverage: the 'destructive power' of a double-edged sword; newcomers must start with low leverage.
🚨 This is the core risk point of contract trading, without exception!
The essence of leverage is 'small bets for big gains'—it can amplify your profits but will also magnify your losses. For example, using 10x leverage, if the market moves 10% against your position, it could trigger liquidation, reducing your principal to zero; if the fluctuation exceeds 10%, it could even lead to debt.
Newcomers must start with very low leverage (such as 1-2 times), use small funds to experience the 'destructive power' of leverage, and only after thoroughly understanding its risk logic should they consider gradually adjusting the leverage multiplier (never blindly chase high leverage).
Stop-loss: the 'lifeline' that protects your principal; it must be set and strictly enforced.
Stop-loss is the 'lifeline' that can control the single loss limit in contract trading. Not setting a stop-loss is equivalent to handing your principal completely over to random market fluctuations.
It is recommended to set a reasonable stop-loss range based on your own risk tolerance (for example, a single loss should not exceed 2%-5% of the principal). For instance, if you hold a position of 10,000 yuan, you could set the stop-loss point at a loss of 200-500 yuan. Once the market hits the stop-loss line, the system will automatically close the position to prevent further losses.
More importantly, 'strict enforcement' is necessary—do not cancel stop-loss orders just because you 'think the market will rebound'. Countless painful lessons from newcomers prove that holding onto positions with a lucky mindset will ultimately turn small losses into large liquidations.
Platform selection: prioritize safety and stay away from small platforms that are 'danger zones'.
The premise of contract trading is 'fund security'; the choice of platform directly determines whether your principal is protected.
Prioritize choosing well-established, reputable, and relatively well-regulated (such as obtaining compliance licenses) large platforms. These platforms have stronger technical risk control and fund custody capabilities, which can reduce the risks of 'platform running away' and 'system failures leading to liquidation'.
At the same time, carefully compare the platform's transaction fees, funding rates (perpetual contracts incur funding fees, paid between long and short positions), and other cost structures. Excessively high trading costs can invisibly erode profits.
Absolutely stay away from unqualified and poorly rated small platforms. These platforms may not only have issues such as 'price spikes' (abnormal market fluctuations) and 'slippage' (actual transaction prices deviate significantly from expectations) but also face the risk of running away at any time. If something goes wrong, your principal may be entirely lost.
⚠️ Two, risk management: in the crypto space, 'surviving' is more important than 'quick profits'.
The core of contract trading is not 'how to earn more', but 'how to avoid losing everything'—staying within risk limits is crucial for long-term survival in the market.
Refuse to 'hold positions': preserving capital is always the top priority, don’t wait for the market to 'turn around'.
Many newcomers hold onto the hope of 'just wait a little longer, the market will definitely rebound' during market reversals, choosing not to set a stop-loss and stubbornly holding their positions, resulting in increasingly larger losses, ultimately turning a 'small loss' into a 'liquidation'.
Remember: the market will not change direction because of your 'expectations'. Decisively stopping loss and exiting is the responsible way to protect your principal. Preserving your principal creates opportunities for future operations.
Stay away from the temptation of high leverage: high leverage is the 'fast lane to liquidation'; restraining greed is key.
There are always cases of 'high leverage earning quick money' in the market, but data does not lie: accounts using leverage above 10 times have a liquidation rate exceeding 80%; accounts using leverage above 20 times have a liquidation rate close to 95%.
High leverage seems to provide 'more opportunities', but in reality, it is a 'risk trap'. It magnifies your greed and fear, making you lose rational judgment during market fluctuations. Newcomers must adhere to the bottom line of 'not engaging in high leverage' and restrain the desire for 'quick money'.
Never go 'all-in': leave enough spare funds to provide 'buffer space' for market fluctuations.
No matter how optimistic you are about a certain market direction, do not invest all your funds in contract trading—always retain at least 30% as spare capital to serve as a risk buffer.
The cryptocurrency market is unpredictable; sudden policies, negative industry news, and market fluctuations can trigger a market reversal. Having spare funds not only ensures you don’t run out of cash during losses but also allows you to seize reasonable opportunities when the market turns around, thus providing a 'retreat route' to go further in the market.
🚫 Three absolute red lines that must not be crossed! Crossing the line = high probability of liquidation.
The following three red lines are the 'death zones' of contract trading; if newcomers touch them, it is almost equivalent to 'actively giving up their principal'.
Stay away from extremely volatile 'meme coins' in contract trading.
The 'meme coin' with short-term price anomalies often experiences extreme price surges due to speculative trading, lacking real value support, and is likely to be followed by a 'cliff-like drop'. If newcomers engage in contract trading with such coins, they may easily become the 'bag holders' at high prices, getting stuck or liquidated when the market reverses.
Eliminate the combination of 'high leverage + all-in'.
This is the 'fastest way to liquidation' in contract trading, without exception! High leverage amplifies risks, and going all-in removes your buffer space. The combination of both means that even a slight market reversal will trigger liquidation, potentially leading to debt, which is equivalent to 'gambling'. Newcomers must resolutely eliminate this practice.
Refuse to trade without stop-loss.
Not setting a stop-loss in contract trading is extremely irresponsible towards your own funds. Without a stop-loss, you cannot control the maximum limit of a single loss, and once the market fluctuates in the opposite direction, the losses can snowball, potentially leading to losing all your principal in one mistake.
⚠️ Final risk warning (please read repeatedly).
The cryptocurrency market is influenced by a multitude of factors such as policies, capital, and emotions, leading to extremely volatile price movements. Contract trading, due to its leverage mechanism, carries risks that are several to dozens of times greater than ordinary spot trading, potentially resulting in total loss of principal or even debt.
The content of this article is for educational purposes only, aimed at sharing basic knowledge of contract trading and common market risk points, and does not constitute any investment advice or trading guidance.
Entering the market involves risks, and investments must be made with extreme caution! Please make decisions independently based on your financial situation (only use 'spare money' that does not affect normal life), investment experience (beginners are advised to start with spot trading to familiarize themselves with the market), and risk tolerance. Do not blindly follow others' trades.
Before participating in any contract trading, it is strongly recommended to learn in-depth through official documents, professional courses, and other channels, fully understanding all related risks. Confirm that you can bear the worst outcome before taking the first step!
