In the wave of the cryptocurrency space, contract trading attracts countless investors with its temptation of 'small bets for big returns', yet very few are able to achieve long-term profits within it. Most people return from the contract market defeated, which is not accidental, but rather a result of the characteristics of contract trading, high risks, and the cognitive and ability limitations of ordinary people.
The leverage mechanism of contract trading is a sharp 'double-edged sword'. It can amplify profits, allowing investors to gain returns of several times or even dozens of times when the market is favorable, but it also amplifies risks simultaneously. When the market trend goes against expectations, leverage can cause losses to accumulate at the same astonishing rate. For most ordinary investors, they often only see the high return potential brought by leverage, ignoring the huge risks hidden behind it.
Many people lack a clear understanding of leverage risks, and when investing funds, they do not conduct adequate risk assessments and capital management. Once they encounter market fluctuations, they can easily be forced to close positions due to insufficient margin, resulting in instant heavy losses.
The cryptocurrency market itself has a strong volatility, and contract trading magnifies the impact of this volatility to the extreme. Cryptocurrency prices are influenced by various factors such as policies and regulations, market sentiment, and technological innovations, often resulting in significant and rapid fluctuations. This intense price volatility tests investors' psychological endurance and decision-making abilities. Most people, when faced with sharp price changes, easily fall into panic or greed, making irrational trading decisions. For example, during a price crash, they may hurry to close positions out of fear, missing the rebound opportunity; during a price surge, they may blindly increase positions out of greed, ultimately getting trapped at high levels.
Moreover, contract trading requires investors to possess professional knowledge and rich experience. It involves judging market trends, analyzing technical indicators, formulating trading strategies, and several other aspects. However, most people entering the cryptocurrency space lack systematic financial knowledge and trading training, having only a superficial understanding of the rules, mechanisms, and market operations of contract trading. They often trade based on temporary enthusiasm and hearsay information, without forming their own trading systems and risk control methods. In a complex and ever-changing market environment, such investors find it difficult to make accurate judgments, making it naturally challenging to achieve success in contract trading.
Furthermore, the contract market in the cryptocurrency space also has some irregular factors, such as certain trading platforms possibly manipulating the market or having excessive slippage. This undoubtedly adds another layer of risk for ordinary investors who lack professional discernment and are in a situation of information asymmetry.
In summary, due to the high leverage of contract trading, the strong volatility of the cryptocurrency market, and the deficiencies of ordinary investors in terms of cognition, professional knowledge, and psychological endurance, most people in the cryptocurrency space are not suitable for participating in contract trading. For investors, before engaging in contract trading, it is essential to fully recognize the risks involved, make cautious decisions, and avoid unnecessary losses caused by blindly following trends. A single tree cannot make a forest, and a lone sail cannot travel far! In the cryptocurrency space, if you don’t have a good network or first-hand information, then it is recommended that you follow CC to guide you to safety; welcome to join the team!
