How much leverage is reasonable for perpetual contracts!
Let me briefly explain what a perpetual contract is. A perpetual contract, as its name suggests, is a contract that has no expiry date. In the current cryptocurrency derivatives trading market, perpetual contracts are considered a relatively new type of contract. The meaning of a perpetual contract is that, provided you do not experience a liquidation, if you do not actively close your position, you can hold this contract indefinitely. So how much leverage is reasonable when trading? Yesterday someone asked me this question, so today I’ll discuss it.
Yesterday, during a conversation with a fellow trader, he mentioned that he typically uses 50x leverage or 30x leverage. For Bitcoin, 30x leverage requires 16 USDT, 50x leverage requires 10 USDT, and 100x leverage requires 5 USDT. Under the same market conditions, my personal suggestion is to use only 100x leverage. Why? Because once you use leverage in trading, whether it’s 1x or 100x, there are inherent risks involved. Under the same market conditions, the returns generated with 1x leverage are vastly different from those with 100x leverage. Some may argue that 1x leverage has lower risk, which is true; however, for Bitcoin, if you use 1x leverage, currently one contract will require over 470 USDT. Without significant price increases, you will definitely incur losses due to transaction fees, and even if there is a minor increase, the profits will be minimal. What I want to express is that since you have chosen to trade with leveraged contracts, you should maximize the use of this leverage and only use 100x leverage.
In many cases, what happens is that traders use limited funds to engage in contracts that do not align with their current capital. With insufficient margin, they cannot support the current market conditions, and may get liquidated in a slightly volatile market. When the profitable market conditions arise later, they have no connection to you at all, and at that point, the contracts we held become invalidated. Therefore, when engaging in perpetual contracts, under the conditions that allow it, we should adequately prepare our margin to avoid any unforeseen circumstances. Regardless of what investment we undertake, there are risks involved, and what we need to do is to minimize those risks to the lowest level possible!
