Why do contracts always get liquidated? It's not bad luck; you simply don't understand the essence of trading! This article, condensed from ten years of trading experience, presents low-risk principles that will completely overturn your understanding of contract trading—liquidation is never the market's fault; it's a time bomb you planted yourself. #US Stablecoin Bill
Three Major Truths That Disrupt Understanding
Leverage ≠ Risk: Position Size is the Lifeline
Using 1% position with 100x leverage, the actual risk is only equivalent to 1% of a full spot position. One student used 20x leverage to trade ETH, investing only 2% of capital each time, with three years of no liquidation. Core formula: Actual Risk = Leverage × Position Ratio
Stop Loss ≠ Loss: The Ultimate Insurance for Your Account
In the March 2024 crash, 78% of the liquidated accounts shared a common feature: they did not set stop losses even with losses exceeding 5%. Professional traders' iron rule: single loss must not exceed 2% of the capital, equivalent to setting a "circuit fuse" for the account.
Rolling Positions ≠ All In: The Correct Way to Compound
Staggered Positioning Model: Initial position 10% for trial, increase position by 10% of profits. With a capital of 50,000, the first position is 5,000 (10x leverage), adding 500 for every 10% profit.
Institution-Level Risk Control Model
Dynamic Position Formula
Total Position ≤ (Capital × 2%) / (Stop Loss Margin × Leverage)
Example: With a capital of 50,000, 2% stop loss, and 10x leverage, the maximum position is calculated as 50000 × 0.02 / (0.02 × 10) = 5000.
Three-Stage Take Profit Method
① Close 1/3 at 20% profit ② Close another 1/3 at 50% profit ③ Move stop loss on remaining position (exit below the 5-day line)
In the 2024 halving market, this strategy increased a capital of 50,000 to one million across two trends, yielding over 1900% return.
Hedging Insurance Mechanism
When holding positions, use 1% of capital to purchase Put options, effectively hedging 80% of extreme risks. In the April 2024 Black Swan event, this strategy successfully salvaged 23% of account net worth.
Deadly Trap Empirical Data
Holding a position for 4 hours: Liquidation probability rises to 92%
High-Frequency Trading: Monthly average of 500 operations results in a loss of 24% of capital.
Mathematical Expression of the Essence of Trading
Expected Profit = (Win Rate × Average Profit) - (Loss Rate × Average Loss)
When setting a 2% stop loss and a 20% take profit, only a 34% win rate is needed to achieve positive returns. Professional traders achieve annualized returns of over 400% through strict stop losses (average loss of 1.5%) and trend capturing (average profit of 15%).
