Many new contract traders are confused: what's the difference between opening 1000U with 10x leverage and 2000U with 5x leverage? At first glance, both have a contract value of 10,000U, but the core difference lies in margin usage and liquidation risk.
Opening 1000U with 10x, the margin directly occupies the entire principal, and once the market reverses, the liquidation line is very close to the entry point; opening 2000U with 5x, the margin only occupies half the principal, providing more buffer space to respond to short-term fluctuations, and the liquidation risk is much lower than the former.
In fact, trading contracts is never about 'betting on leverage multiples,' but it relies on a closed-loop strategy to steadily build wealth. In the first quarter of 2024, I started with an initial capital of 4940U and spent over a month achieving nearly 20,000U in profits, completing a fourfold increase. This method is not complicated; the core is treating trading as 'strategic deployment,' not 'gambling' — you can't rely solely on 'opening positions based on indicators,' you also need risk control, position sizing, stop-losses, and other 'supporting plans,' just like in battle, you can't just carry a gun; you also need shields, retreat routes, and supplies.
A closed-loop trading strategy that can withstand bull and bear markets must cover these seven core modules.
A trading system is not 'a pile of indicators,' but 'complete process control from entry to exit.' A qualified strategy must address these seven questions: 'how to control risk, how to position size, why to enter, where to enter, how to exit when losing, how to take profits when winning, whether to add or reduce positions,' and none can be omitted.
1. Risk control: Equip the account with a 'safety valve'
You aren't trying to eliminate losses, but rather to avoid 'a single loss wiping out the account.' Risk control is like a safety valve in electrical appliances — it doesn’t stop power outages but prevents short circuits from destroying the entire circuit. For instance, if you have 1000U principal and can lose a maximum of 20U per trade, even with 50 consecutive stop-losses, the account still has funds; but if you lose 200U in one trade, five stop-losses would wipe out the principal.
2. Position management: Controlling position size is controlling 'survival.'
Market volatility is like winding mountain roads; position size is the weight of the vehicle: too much weight can easily cause a rollover on steep slopes and sharp turns; with the right weight, even rough roads can be navigated smoothly. Small funds especially need to be cautious: never invest all your principal in one trade, even if you believe the 'market is 100% right,' you must leave some funds for unexpected events.
3. Opening logic: Don’t rely on 'feelings' to enter.
Before opening a position, you must think clearly about 'why go long/short': Is it a technical breakout of a head-and-shoulders bottom? Is it positive news for a project's fundamentals? Or is there 'much more buying than selling' in the order book? These bases must be clear; you cannot enter based on 'I feel it will rise' — opening a position without logic is no different from flipping a coin.
4. Opening point: Make entering the market more 'precise'
After establishing logic, determine 'where to enter.' For example, if you open a position because 'support levels look bullish,' do you wait for the price to test support and buy low? Or do you chase after the price breaks above resistance? The entry point must match the logic: entering at support means setting a stop-loss below the support; entering on a breakout means setting a stop-loss below the resistance, making the risk more controllable.
5. Setting stop-loss points: Don't let mistakes 'magnify'
The stop-loss point is not 'how much loss I can accept,' but rather 'the point where my opening logic fails.' For instance, if you enter the market because 'BTC stabilizes at 50,000U and looks bullish,' if the price drops below 50,000U, it indicates that the 'stabilization' logic has failed, so you must stop-loss and exit — even if the price rises again after stopping out, you cannot break the rules; discipline is more important than being right or wrong in a single trade.
6. Profit-taking strategies: Secure your profits.
Profit only counts when it is realized; don't let 'paper wealth' turn into losses. Take profits using these methods: first is fixed proportion take profit, for instance, sell half your position when you earn 10%; second is profit-loss ratio take profit, such as when the risk is 20U at opening, take profit after earning 40U (risk-reward ratio of 1:2); third is trailing stop profit, for example, if the price rises by 50U, move the stop-loss above the breakeven point, so even if the market pulls back, you can exit without a loss.
7. Position adjustment mechanisms: Enhance profits.
This is an advanced aspect of the strategy, but rules must be followed: only add positions when in profit, for example, after going long and already earning 100U, then use a small amount of funds to add to the position while moving the stop-loss to the breakeven point — even if the market pulls back, the principal won’t be lost; never add to a losing position, for instance, if you lose 50U after going short, adding to the position will only double the risk and is likely to lead to liquidation.
Trend identification: You can understand the direction without indicators by looking at the candlestick chart.
Many traders struggle with 'how to judge the trend,' but the answer lies in the candlestick chart — there's no need to look at indicators like MACD or RSI, just observe the 'highs and lows' of the price:
- Uptrend: Each high point (HH) of every rise is higher than the previous high, and each pullback low point (HL) is also higher than the previous low. For example, if BTC rises from 40,000U to 50,000U, pulls back to 45,000U, and then rises to 52,000U, that is a typical uptrend.
- Downtrend: Each low point (LL) of every decline is lower than the previous low, and each rebound high point (LH) is also lower than the previous high. For example, if ETH drops from 2000U to 1800U, rebounds to 1900U, then drops to 1700U, that is a downtrend.
If there is no 'progressive structure of highs and lows,' it indicates that the market is in a consolidation phase — at this time, do not chase peaks or troughs, wait for a breakout from the range and a clear trend to enter. Remember the 'golden rule' of trading: buy on pullbacks in an uptrend and sell on rebounds in a downtrend. For instance, in an uptrend, if the price pulls back near previous lows, that's a buying opportunity; in a downtrend, if the price rebounds near previous highs, that's a selling opportunity.
Small funds trading contracts: Don't seek 'speed,' first seek 'survival.'
Many beginners trading contracts with around 10,000 (about 1400U) often feel that 'small capital requires aggressive trading.' But the truth is: small funds are more afraid of liquidation — large capital can withstand corrections over time, but once small capital is liquidated, it has to recharge and start over. I will share a position management method suitable for a capital of 5000-20000, where the goal is not 'to double in a day,' but 'low drawdown, steady compound interest.'
1. Core goal: Earn 10%-20% each month, which is more reliable than 'taking a gamble.'
When trading contracts with small funds, don’t expect to 'make enough money for a car with a single trade,' but instead aim for 'enough to buy a phone each month' — for example, with a 1400U account, earning 140-280U each month would result in a 1.5-3 times return over a year. The key is to control 'single trade losses': lose a maximum of 2% of the total capital per trade, which is 28U, even if you incur 50 consecutive losses, the account still has funds.
2. Four-step position management: Provide 'insurance' for small funds.
- Step one: Segment the account, reserve 'emergency funds.'
Divide 1400U into 4 parts, each part 350U, and only trade with 1 part at a time, leaving the other 3 parts untouched. This is equivalent to leaving 3 'margin for error' opportunities for the account; even if you incur losses for 3 consecutive times, you still have 75% of the funds to adjust your strategy and won't lose everything at once.
- Step two: Reverse calculate position size, determine 'number of contracts to open' based on risk.
First calculate the 'acceptable loss,' then reverse calculate how much to open. For example, with a 1400U account, the maximum loss per trade is 28U, and when trading BTC contracts, the volatility from entry to stop-loss is 500USDT. With 10x leverage, each contract's volatility is 50USDT. Therefore, the maximum you can open is 0.56 contracts (28÷50≈0.56), about 0.5 contracts — it’s not about how much you want to open, but how much risk allows you to open.
- Step three: Pyramid adding positions, only 'add' when in profit.
For example, if you go long with 350U and have an unrealized profit of 100U, then use 100U to increase your position while raising the stop-loss to the breakeven point. This way, even if the market pulls back, the added position may incur losses, but the initial position can break even; if the market continues to rise, you can earn more — the core of increasing positions is 'not increasing the risk of the principal.'
- Step four: Determine position size based on market conditions, 'reduce positions' during high volatility.
When there are major policy changes or substantial fluctuations in cryptocurrency prices, reduce your position by half. For example, if BTC suddenly rises or falls by 10%, the market sentiment becomes chaotic, easily leading to stop-losses being triggered repeatedly; small accounts can't withstand such volatility, so lighter positions or waiting is more prudent.
3. Small capital should pay special attention: Avoid these 3 pitfalls.
- Don't exceed 20x leverage: Leverage is a 'magnifying glass,' amplifying both profits and mistakes. Short-term veterans may handle high leverage, but for swing trading, using lower leverage is steadier, avoiding 'losing everything in one mistake.'
- Choose the right platform to save on fees: small capital has thin profits, and fees account for a large portion. Try to choose a large platform, open an account using a rebate link, and avoid frequent trading on platforms with high fees — for example, if each trade incurs a 1% fee, making 100 trades would result in a loss of 100% of the principal.
- In volatile conditions, don’t force trades: when prices fluctuate between support and resistance, don’t chase after peaks or troughs. Wait for a breakout of the range and a clear trend to enter, which has a higher win rate and avoids 'being stopped out repeatedly.'
Small funds win by being 'stable,' not 'aggressive.'
Many people think 'small funds need to trade quickly,' but in fact, small funds should seek 'stability' — you don’t lose because of poor skills, but because you didn’t control position size well, leading to liquidation. When position sizes are stable, emotions stabilize, and operations won't go awry; when the strategy is closed-loop, even encountering fluctuations or pullbacks can be endured.
After experiencing three rounds of bull and bear markets and struggling in various financial fields like cryptocurrencies and stocks for many years, I have seen too many traders go bankrupt due to greed and lack of a system.
Here, I want to help you clear the fog of the market: stop being obsessed with indicators that promise 'overnight riches,' and don't get bogged down by '10x or 5x leverage.' First, establish a closed-loop strategy that can control risk, focus on 'surviving,' and then gradually earn — trading is not a gamble, but a long-term practice.
