How much leverage is reasonable for perpetual contracts! $ETH $BTC

Before answering this question, let me briefly explain what a perpetual contract is. A perpetual contract, as its name suggests, is a contract that is renewed indefinitely. In the current digital currency derivatives trading market, perpetual contracts are considered a relatively new type of contract. The meaning of perpetual contracts is that, under the condition of not being liquidated, if you do not actively close your position, you can hold this contract indefinitely. Now, how much leverage is reasonable while trading? Yesterday, someone asked me this question, so I will discuss it today.

Yesterday, I communicated with a fellow trader, and he usually uses 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 use leverage in trading, whether it is 1x or 100x, it carries leverage risk. Under the same market conditions, the profits generated from 1x leverage and 100x leverage are vastly different. Some may say that 1x leverage has lower risk, which is true; however, taking Bitcoin as an example, if you use 1x leverage, currently one contract costs more than 470 USDT. Without a significant price increase, you would definitely incur losses due to transaction fees, and even with a slight profit, it would be minimal. What I want to express is that since you choose to trade with leveraged contracts, you should maximize the use of that leverage and only use 100x leverage.

In many cases, what happens is that with limited funds, traders engage in contracts that do not match their current capital. With low margin, they cannot support the current market, which may lead to liquidation during periods of higher volatility. When a profitable market condition arises later, it has nothing to do with you, and at that point, the contracts you hold become invalid. Therefore, when trading perpetual contracts, under permissible conditions, we should adequately prepare our margin as a precaution. No matter what investment we make, there are risks involved, and what we need to do is to minimize those risks and then look at the benefits. Holding onto losing positions is a major taboo in contract trading; it is essential to cut losses in a timely manner.