Before answering this question, let me briefly explain what a perpetual contract is. A perpetual contract, just like its name, is a contract that can be renewed indefinitely. 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, without liquidation, if you do not actively close your position, you can hold this contract permanently. So, how much leverage is reasonable when trading? Someone asked me this question yesterday, so I’ll talk about it today.
Yesterday, I communicated with a friend about cryptocurrencies. He usually uses 50x leverage or 30x leverage. Taking Bitcoin as an example, 30x leverage requires 16U, 50x leverage requires 10U, and 100x requires 5U. Under the same market conditions, my personal suggestion is to only use 100x leverage. Why? Because once you open leverage in contracts, regardless of whether it's 1x or 100x, you carry leverage risk. Under the same market conditions, the returns from 1x leverage and 100x leverage are worlds apart. Some people may say that 1x leverage has lower risk, which is true, but taking Bitcoin as an example, if you use 1x leverage, currently one position requires over 470U. Without significant price increases, you will definitely incur losses, as the cost of transaction fees is there. Even if there are no significant price increases, you won't make much profit even if you do earn. What I want to express is that since you've chosen to trade leveraged contracts, you should maximize the use of that leverage and only use 100x leverage.
In many cases, what happens is that people use thin funds to trade contracts that don't match their current capital. With little margin, they can't support the current market, which may pull back and forth. In a slightly volatile market, they might face liquidation, and when a profitable market comes up later, it has nothing to do with them. At that time, the contracts we hold have all expired. Therefore, when trading perpetual contracts, if conditions allow, we should appropriately increase our margin to be prepared for any situation. Regardless of what investment we make, there are risks involved. What we need to do is minimize the risk and then look at the profits. Holding onto positions is a major taboo in contract trading, and cutting losses in a timely manner is very necessary.
Timely cutting losses, combined with a position-by-position risk management approach, minimizes risk. Do not joke with your own principal. Set a daily target for yourself; when you achieve it, take the profit. Contracts will become very simple. Friends who have been in contact with contracts for a long time know that if you have 5000U as your capital, making a profit of 50-100U daily is quite simple. With some methods, it becomes even easier. Earning 50-100U a day translates to how much in a month? 1500--3000U! Of course, in actual operations, you may encounter significant market fluctuations or various unexpected situations. If we compromise, in a month with 30 days, as long as you achieve your daily target for 20 days, that’s still profitable. After saying so much, I hope this can help cryptocurrency friends.
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