A few days ago, I helped a fan review their trades, and he cried, saying: 'Bro, I saw that ETH was going up, opened a long position, but the funding rate made me lose 300U every day. I held on until the fourth day and got liquidated; just when I closed it, it soared!'
This is not just bad luck, it's not understanding the essence of contracts — you think you are betting against the market, but you are actually battling the exchange's rules. Today, I will expose the three most deceptive 'hidden rules,' each accompanied by escape techniques.
First, funding rate: the exchange secretly harvests your 'tax'.
Many people don't know that contracts charge funding fees 3 times a day (8:00, 16:00, 24:00). This is not a transaction fee, but a 'queue fee':
Positive rate (e.g., 0.15%): Long positions pay fees to short positions (indicating too many long positions, forcing liquidation);
Negative rate (e.g., -0.1%): Short positions pay fees to long positions (too many short positions, forcing shorts to exit).
Last May, there was a market movement where the BTC funding rate exceeded 0.12% for 3 consecutive days. My student, Lao Wang, didn't believe in evil, fully leveraged and went long, resulting in being charged 500U in funding fees every day. By the third day, he couldn't hold on and closed his position, just as BTC started to rise — he didn't lose on the direction, he lost by giving money to the counterparty.
Escape techniques:
Check the exchange's 'historical funding rates'; if the rate exceeds 0.1% for two consecutive times, absolutely do not go long (risk of long position squeeze).
Hold a position for no more than 8 hours (to avoid being harvested for funding fees twice);
Open positions using 'limit orders' (30% less slippage fee compared to market orders).
Second, liquidation price: 10% closer than you calculated, and fees are the invisible killer.
Do you think a 10 times leverage drop of 10% will lead to liquidation? Too naive. Actual liquidation price = (opening price × (1-1 / leverage)) + liquidation fees (usually 0.5%-1%).
For example, opening a long position of 10 times leverage with 10,000 U (actual margin 1000U):
Theoretical liquidation price: 10,000 × (1-1/10) = 9000U;
Actual liquidation price: 9000U + (10,000 × 10 times × 0.5%) = 9000 + 500 = 9500U.
That is to say, a 5% drop will lead to liquidation, which is double the time you calculated! Last year, a fan got liquidated this way, thinking he could hold on for 10%, but got liquidated at 5%, watching it rebound later.
Escape techniques:
Use 'isolated margin mode' (liquidation only affects the current position, not other funds);
Choose leverage of 3-5 times (safer liquidation line, lower fees);
Manually add 3% margin when opening an order (for example, if the margin is 1000U, add 30U, which can move the liquidation line back by 3%).
Third, high leverage: short-term is heaven, long-term is hell.
100 times leverage looks tempting, but fees and funding fees are calculated based on 'post-leverage positions'. For example, 100U opened with 100 times leverage results in an actual position of 10,000 U:
Transaction fee: 10,000 U × 0.05% × 2 (once for buying and once for selling) = 10U (equivalent to 10% of the principal);
Funding fee: If the rate is 0.1%, three times a day means 0.3%, 10,000 U × 0.3% = 30U (30% of the principal).
Holding a position for more than 4 hours can eat up 40% of your principal just in fees! I've seen the most exaggerated case, holding a position with 100 times leverage for 12 hours, got it right and made 50U, but the fees deducted 80U, resulting in a loss of 30U.
Escape techniques:
100 times leverage should only be used for '5-minute short-term trades' (catching sudden price movements, quick battles);
If holding a position for more than 1 hour, you must reduce leverage to 5 times or less;
Trade no more than 3 times a day (to reduce fee losses).
Four, rolling positions: use 50% of profits to gamble, keep 50% to stay safe.
Rolling positions can double profits, but rolling the entire position is risking your life. My current approach is:
After the first position makes a profit, withdraw 50% in cash (secure your gains);
Use the remaining 50% of profits to open a new position, with leverage half that of the first position (for example, if the first position used 5 times, the second position uses 2.5 times);
As soon as a new position loses more than 3%, close it immediately, never add to the position.
Student Xiao Zhang used this technique last month, rolling 1000U to 8000U: first position made 500U, withdrew 250U, opened a new position with 250U, and even if the second position lost, the loss would only be 50% of the profit, with the principal intact.
Finally, let me say something from the heart:
Contracts are not about betting on size; they are about 'battling the exchange rules.' If you understand the signals of funding fees, you will know when to run; if you calculate the liquidation line accurately, you won't be suddenly liquidated; if you control leverage time well, you won't be drained by fees.
Next week, ETH may experience abnormal funding rates, I will remind you in real-time. If you want to avoid these pitfalls, you can follow me @bit多多 — the secret to making money in contracts is not in being right or wrong in direction, but in understanding the rules a bit better than others.
Remember: those who can survive in contracts are the ones who see through 'how the exchange wants you to die.'