Having read many answers, why do I feel that your contract leverage options are only 100x and 125x? How big must the needle be to encounter forced liquidation so easily!
In fact, high-leverage contracts are essentially no different from gambling. If you are just playing with a few hundred dollars, it is not a big deal. But if you go all-in with high-leverage contracts, that is purely self-destructive.
In simple terms, the original intention of a contract is to help you increase your capital utilization. The cost of perpetual contracts is reflected in the funding fees, while the cost of delivery contracts is reflected in the premiums. Of course, this cost can be 0 or even negative, but I won't go into detail here.
Many people neither have a mature trading system, have poor risk tolerance, nor possess strict trading discipline, and they particularly like to hold onto positions. They may feel that a 30% drop in spot prices doesn't seem like a big issue, but a threefold contract may lead them to lose everything.
This kind of thinking is completely wrong. Firstly, being able to withstand a 30% loss indicates that you have not strictly adhered to trading discipline and are purely gambling in the market. You might say you are making long-term investments, but long-term investing is not suitable for opening contracts because of the risk of increasing costs.
You only have a reason to open a contract when you have a strict stop-loss strategy and can accept the losses brought by a wrong trade.
For example, if you have 100,000 USDT, and the current price of Bitcoin is 100,500 USDT, you believe that the 100,000 USDT price level is an important support that will not be broken, and you will stop loss once it is broken. Your acceptable loss is 10,000 USDT, and you are willing to take this cost gamble, then you might consider opening a position with 20x leverage. This way, even if your judgment is wrong, the loss is within your acceptable range. But if you do not set a stop loss, then when the price drops to 95,000 USDT, you will have been liquidated, losing everything.
Now you understand, before opening a contract, you must clearly know how much loss you can bear at most and ensure it is within your range.
Another situation is, when it is clear that the current market is bullish, all cryptocurrencies are rising, and large-scale pullbacks are unlikely, in order to increase capital utilization, you can use no more than 3x leverage to allocate different cryptocurrencies, which is also a reasonable approach.
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In the cryptocurrency circle, if you are still going solo, without a quality community to communicate with, and unable to receive first-hand information, then your path forward is bound to be full of difficulties.
