How much leverage is reasonable for perpetual contracts!

Before answering this question, let me briefly explain what a perpetual contract is. A contract, just like its name suggests, is a contract that is extended indefinitely. In the current cryptocurrency derivatives trading market, perpetual contracts are considered a relatively new type of contract. The meaning of perpetual contracts is that, without liquidation, if you do not actively close the position, you can hold this contract indefinitely. So how much leverage is reasonable when operating? Someone asked me this question, so I’ll talk about it today.

Yesterday, I was discussing with a crypto friend, and he usually uses 50x leverage or 30x leverage. For Bitcoin, 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 use 100x leverage only. Why? Because once you use leverage for contracts, whether it’s 1x or 100x, you carry the risk of leverage. Under the same market conditions, the returns from 1x leverage and 100x leverage are vastly different. Some people might say that 1x leverage carries less risk, which is true; for Bitcoin, if you use 1x leverage, currently one contract requires more than 470 USDT. Without significant price increases, you will definitely incur losses, as transaction fees are a factor. Furthermore, without significant price increases, even if profitable, the gains will not be substantial. What I want to convey is that since you have chosen to use leveraged contracts, you should maximize the use of this leverage.

In many cases, what happens is that people use insufficient funds to engage in contracts that do not match their current capital. With little margin, it cannot support the current market, and you may get liquidated in a market with slightly larger fluctuations. When a profitable market comes later, it has nothing to do with you, and at that point, the contracts you hold become invalid. Therefore, when engaging in perpetual contracts, under permissible conditions, we should prepare a little more margin. No matter what investment you make, there is always risk involved. What we need to do is to minimize the risk and then look at the benefits. Holding onto a losing position is a major taboo in contract trading, and timely cutting losses is very necessary.

Having said all this, I hope it helps you.