Before answering this question, let me briefly explain what a contract is. A contract is exactly what its name suggests, a perpetual contract. In the current digital currency derivatives trading market, the perpetual contract is 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 permanently. So how much leverage is reasonable when operating? Yesterday someone asked me this question, so I’ll bring it up today.
Yesterday, I discussed with a crypto friend. He usually trades with 50x leverage or 30x. Taking Bitcoin as an example, 30x requires 16 oil, 50x requires 10 oil, and 100x requires 5 oil. Under the same market conditions, my personal suggestion is to only open 100x leverage. Why? Because once you open leverage in contracts, whether it's 1x or 100x, it carries leverage risk. Under the same market conditions, the profit generated by 1x leverage and that by 100x leverage is vastly different. Some people might say that the risk of 1x leverage is small, which is true. Taking Bitcoin as an example, if you use 1x leverage, currently one requires more than 470 oil. Without a significant increase, you are definitely at a loss; the cost of transaction fees is there. Also, without a significant increase, even if you are profitable, it won’t be much. What I want to express is that since you chose to trade leveraged contracts, you should maximize the use of this leverage; only open 100x leverage.
What is it like in many cases? Taking thin funds to engage in contracts that do not match the current capital, with little margin, unable to support the current market situation. It may get pulled back and forth in a market, and in a slightly volatile market, you might get liquidated. When a profitable market comes later, it has nothing to do with you. At that time, the contracts we hold become invalid. Therefore, when trading perpetual contracts, under conditions that allow it, we should appropriately prepare more margin for ourselves, better safe than sorry. No matter what investment we make, there are risks. What we need to do is to minimize those risks and then look at the benefits. Holding onto losing positions is a big taboo in contract trading; timely cutting losses is very necessary.
Timely cutting losses, combined with a position-by-position approach, minimizes risk. Do not joke with your own principal. Set a daily target for yourself; when you reach the goal, take it. Trading contracts will become very simple. Friends who have been in contact with contracts for a long time know that if you have 5000U as capital, isn't it very simple to profit 50-100 oil every day? With some methods and strategies, it becomes even simpler. Earning 50-100 oil in one day, how much is that in a month? 1500-3000 oil. Of course, in actual operations, you may encounter major market fluctuations or various unexpected events. To balance it out, in a month of 30 days, as long as you complete your daily target for 20 days, you still make a profit. Lastly, manage your position well, set stop losses properly, don’t go all-in with heavy positions, and set take profit and stop loss. After saying so much, I hope it can help you.
