Many people enter the crypto space hoping to find a thousandfold coin, wanting to become wealthy overnight. As a result, many newcomers have not even established a trading system, and may not even know what K-lines are, yet they jump in, hoping for financial freedom by tomorrow.
I strongly advise everyone to fully understand what virtual currency contracts are, what advantages and risks they entail, and whether they are suitable for themselves before playing with them. Can you really deal with your own nature without facing liquidation?
Those who have traded contracts may understand what I am saying. Even though we know all the trading disciplines—stop-loss, take-profit, controlling leverage—when it actually comes to trading contracts, we forget everything. When it's time to stop-loss, we fail to execute, foolishly thinking we can just hold on, but end up facing liquidation.
Moreover, playing with contracts can easily lead to obsession. Feeling that small leverage is not thrilling enough, one might jump in with a 50x leverage in pursuit of excitement. Behind the 50x leverage is the amplified greed of human nature, and many investors find it hard to control their instincts in that moment, failing to adhere to trading discipline, ultimately losing everything and exiting. Often, the biggest enemy in trading is ourselves.
Contract trading is all about the thrill of big gains and big losses. If you get the direction right, you can become rich overnight; if you misjudge the trend, you may quickly become impoverished. Investors should understand the pros and cons of contract trading before deciding whether to enter the market. Consider all factors before making a decision.
There is no guaranteed way to make money in this world, especially when it comes to making big quick profits. Contract trading can amplify profits but also carries a huge risk of losses. The biggest risk is liquidation.
With a bang, the mushroom cloud appears, and from then on, the position is just a passerby.
Many people clearly choose the right direction, but when they wake up, they find they are still liquidated. Why is that?
This brings us to a term commonly used in the crypto circle.
What is called a spike refers to a thin line that appears on the K-bar in technical charts, indicating a sudden crash (or surge) in coin price that quickly stabilizes again. For spot investors, it makes no difference as long as they do not sell their assets during the spike phase; this brief moment will not affect any profits.
Playing with contracts is different because leverage amplifies both the rise and fall. For instance, if you open a 100x contract, a mere 1% drop in coin price can immediately liquidate your position, regardless of whether it later rises by 1000 times.
Therefore, sometimes investors find that despite being sure of the trend, their positions are gone. This happens because the coin price was once spiked (either up or down) at a moment that was exactly contrary to your trading direction, leading to your liquidation.
In such market conditions, even seasoned investors cannot escape, it is a typical ratio contract.
It is precisely because of greed and gambling tendencies that most people in the crypto circle are not suitable for contract trading.
