Playing contracts should be with small funds and low leverage, or large funds and low leverage?

Those who often engage in contracts know that one cannot choose large funds with high leverage,

Because you may succeed countless times, but as soon as you fail once,

You will be expelled from the market, with no chance of a comeback,

What we need to do in the financial market is not to compete on who lives more comfortably, but rather on who lives longer.

So we have two options, one is small funds with low leverage,

The other is large funds with low leverage,

My suggestion is to use large funds with low leverage to play contracts.

If the initial capital is 100,000 yuan, using a strategy of large funds with low leverage, which means dividing the capital into 10 parts, each part being 10,000 yuan, and using lower leverage (2-5 times) for trading.

1. Risk Diversification

Dividing the capital into 10 parts for operation, betting only 10% of the total capital each time, helps to control the risk of a single trade and reduces the possibility of liquidation. High leverage will not lead to losing all funds even if there are losses.

2. High Capital Utilization

Large funds with low leverage can fully utilize the available funds. With 10,000 yuan, using 5 times leverage is equivalent to a trading scale of 50,000 yuan.

3. Strong Drawdown Control Ability

In the large funds with low leverage model, even if there is a significant drawdown, there is still enough capital to continue trading, increasing the chances of recovering profits.

4. Obvious Compound Interest Effect

By repeatedly making small profits and large profits, the compound interest effect can gradually amplify returns. This is easier to achieve in the large funds with low leverage model.

5. Smaller Psychological Burden

When operating with low leverage, the psychological endurance will be better, and decision-making will be more decisive, which is beneficial for obtaining stable returns.

Of course, adopting a strategy of small funds with high leverage also has its reasoning, but I still do not recommend this approach. The reasons are as follows:

1. Excessive Risk per Trade

Although the amount bet each time is small, high leverage magnifies the risk. Once there are consecutive losses, small funds may be quickly depleted. In the large funds and low leverage model, even with short-term losses, there is more capital to act as a buffer.

2. Higher Operating Costs

In the small funds high leverage model, to achieve a position size equivalent to that of the large funds model, more trades need to be executed, and increasing the number of trades inevitably increases costs such as transaction fees.

3. High Psychological Pressure

High leverage trading results in large fluctuations in returns, which requires a high level of psychological endurance from traders. Once there are consecutive losses, it can easily affect operational judgment.

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