I see many people say they opened 3X, 5X, or 10X leverage and that’s already a small leverage. I’m really speechless; in fact, I must tell you all, you are all wrong.
Leverage is not calculated this way; the leverage ratio calculated by the platform has little to do with you. It’s more about the proportion affecting the platform's safety. You should calculate risk based on stop-loss or sufficient principal.
For something as volatile as crypto, open positions evenly in increments, with about 10-20% of the principal each time. The total position should be around 2 (short) to 4 (long) times the principal. The overall stop-loss risk at any one time should be within 20% of the principal (or within your psychological tolerance, which must be less than 20%). It’s recommended to average risk at 10%, meaning there will be times when you are flat. Some may ask, why do contracts then?
To say something might offend the entire crypto circle: do you really want to earn cryptocurrency or just make money? Is there a more flexible speculative tool than contracts? Is USDT really useless? As the bear market arrives, what’s safer, cryptocurrency or USDT? When you spend money, are you spending cryptocurrency or USDT?
Dear friends in the crypto circle, contract trading (pure speculation) and investing in cryptocurrencies (similar to venture capital) are completely different professions.
The essence of contracts is trading risk. In other words, to make money through contract trading, one must understand this statement clearly in terms of risk management and expectations.
You may not believe in technology, the market makers, candlestick patterns, or BTC, thinking they are all liars. Conversely, you can choose to believe in them. These conceptual issues won’t prevent you from making money.
But there's one thing you must understand: 'risk'. What is risk? How to manage risk? How to calculate risk? How to operate with risk? How to withdraw from risk? How to survive...?
-------You cannot earn money beyond your understanding... Originally, if you invest in a cryptocurrency and its value doubles, you earn 100%; then if you do contracts with 3 times leverage, and end up making 300%, where does this extra money come from? Do you know?
——In contract trading, the money you earn is essentially the money from risk management, which is the money others lose and get liquidated, given to you. To get this money, first, you must not get liquidated...
In fact, looking at the market from a 'risk' perspective is completely different from how ordinary people view it. It’s like viewing a mountain from the base versus seeing it from the peak; they are fundamentally different. To give an example, those who buy cryptocurrencies can hold positions waiting for prices to rise, endure losses, and emphasize patience... But for contract trading, if you hold a position waiting and endure losses, most likely you won't survive the first three episodes.
Therefore, operations based on risk management are completely different from operations based on dreams. In the trading market, dreaming costs money, while those managing risk are striving to take that money.
So, do you want to be a 'dreamer' or a 'risk manager'? It depends on yourself. However, 'dreamers' shouldn't engage in contracts, as trading contracts can shatter long-held dreams within days, and waking up from that is too fast.
Anyone who has made a lot of money will have a feeling during the process: 'That time was almost like picking up money.' Kind of, but—when your opportunity comes, meaning: when it’s your turn to pick up money, you must be alive and have the capital to do so.
Yes, making money from contracts isn't difficult, especially since there are so many people getting liquidated and giving away money. They are speeding on the edge of a cliff; you just need to wait at the bottom of the cliff and pick up a few parts to get by.
The difficulty lies in its inherent contrarian nature. Basically, you have to think the opposite of the common person’s thoughts about 'getting rich overnight'. Whenever you are eager to increase your position or open a new one, you need to think about what it means to 'go against human nature'.
...If buying cryptocurrency is like fishing, then trading contracts is like stepping into a boxing ring... This is why I say there is a lot of time spent in a flat position, which is quite normal. Waiting, probing, retreating, trying again, waiting again... This is the norm for successful speculators.
In fact, strategies for a period are almost straightforward and can be said to be known by everyone.
For example, on February 14, 2022, many teams' strategies are to short most cryptocurrencies and selectively go long on BTC as a hedge.
There’s no need to elaborate on the reasons; think of yourself as a big shot in the crypto world and extrapolate. With such an absolutely profitable strategy, 80% of people still can’t make money from contract trading.
However, such a simple strategy actually contains countless details. For example, the simplest operational principles, why not short based directly on BTC, why shorting is much more conservative than going long, and the holding time is much shorter for shorts. How to manage stop-loss for shorts, how to short various tech coins... The stop-loss strategy for contracts needs to have a theory that is worth learning. The value of stop-loss theory is at least worth half of what you invest in contracts. If you really can’t find one, you need to derive one yourself (that’s how I did it; I found someone, they wouldn't teach, so I derived a set myself). A complete set of theories means a complete set of operations. If strictly executed, there will always be opportunities.
Trading is like this: on the surface, it’s extremely simple—just buy and sell (one minute on stage), but behind it, countless people have put in the effort (ten years of effort off stage). Overall, this is a profession. It's not that beginners can't do it, but you must seriously study and train before you can truly step onto the field.
Let’s compare flying a plane to speculation. The reason is that these two are fundamentally similar; if you force yourself to fly a plane without knowing how, the result is destruction of the plane and loss of life. If you force yourself to speculate without knowing how, you will inevitably get liquidated.
Risk management and stop-loss management are like the most basic skills of flying an airplane. With this, you can at least ensure you won’t die.
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If you are confused and helpless about how to open a position, follow me. I need fans, you need references; blind guessing is not as good as following Brother Sheng from the crypto world!
