How much leverage is reasonable for perpetual contracts?

Before answering this question, let me briefly explain what a perpetual contract is. A perpetual contract, as its name suggests, is a contract with a perpetual duration. In the current digital currency derivatives trading market, perpetual contracts are considered a relatively new type of contract. The meaning of a perpetual contract is that, under the premise of not being liquidated, if you do not actively close the position, you can hold this contract indefinitely.

Yesterday, I discussed with a fellow trader who usually trades with 50x leverage or 30x leverage. Taking Bitcoin as an example, 30x leverage requires 16 USDT, 50x leverage requires 10 USDT, and 100x requires 5 USDT. Under the same market conditions, my personal suggestion is to only use 100x leverage. Why? Because once you leverage a contract, whether it's 1x or 100x, you incur leverage risk. Under the same market conditions, the returns generated from 1x leverage and 100x leverage are vastly different. Some might say that 1x leverage has lower risk, which is true, but taking Bitcoin as an example, if you are using 1x leverage, currently one contract requires over 470 USDT. Without significant price increases, you are definitely at a loss, considering the transaction fees. Moreover, even if there is a profit without a significant price increase, it won't be much. What I want to express is that since you have chosen to trade leveraged contracts, you should maximize the use of that leverage and only use 100x leverage.

In many cases, what happens is that traders use thin capital to trade contracts that do not match their current capital. With little margin, they cannot support the current market, and may get liquidated in a slightly volatile market. Even if a profitable market comes later, it has nothing to do with you, and at that point, the contracts you hold become invalid. Therefore, when trading perpetual contracts, under allowable conditions, we should adequately prepare our margin, as it’s better to be safe than sorry. Regardless of what investment you make, there are risks involved. Our goal is to minimize those risks and then evaluate the benefits. Holding onto losing positions is a big taboo in contract trading; it is crucial to cut losses in a timely manner.