Recently, a fan messaged me saying they correctly predicted the direction but held onto their position for four days, losing 1000 U to funding fees, and ultimately got liquidated. After closing their position, the market soared...
This is a typical mistake in the rules, not in the market.
Are you clear about the real rules of the contract, or are you just focused on the ups and downs?
Let me analyze a few common pitfalls for everyone. If you avoid these, your journey in contracts might be more stable.
The first pitfall: funding fees, quietly draining your wallet.
Many people only focus on K-lines in contracts, but they fail to notice that funding fees are quietly harvesting.
Funding fees are charged every 8 hours, according to the direction of your long and short positions.
When the rate is positive, long positions have to pay short positions.
When the rate is negative, short positions have to pay long positions.
For example, if you are fully leveraged on a long position, the direction is right, but if you hold on for too long, and the funding fees take away several hundred U over two days, resulting in liquidation, and then the next day the market soars, it can be extremely painful.
Pitfall avoidance suggestions:
Avoid high fee periods (when consecutive funding fees are above 0.1%).
Control your holding time, preferably not exceeding 8 hours.
If the direction is clear, try to take the opposite side of the funding fee.
The second pitfall: the liquidation price is not the line you calculated.
Many friends think that with 10x leverage, a 10% drop will cause liquidation, but they find that liquidation occurs after just a 5% drop.
Why?
Because the platform adds a liquidation fee, making the liquidation line closer than you calculated.
Solution:
Do not use full leverage; use the 'isolated margin' mode to protect the overall situation.
Control leverage between 3 to 5 times to avoid high leverage risk.
Leave enough margin to automatically extend the liquidation distance.
The third pitfall: high leverage = a killing knife.
100x leverage may look exciting, but there are many hidden costs behind it.
Transaction fees and funding fees are calculated based on the 'borrowed' funds. Even if your direction is correct and you earn several hundred U, the settlement may result in losses due to fees.
It is advisable to remember:
High leverage for short trades, low leverage for long holds.
The higher the leverage, the greater the risk. Do not act impulsively.
It's not that you can't do it, but that you don't understand the rules.
Exchanges are not afraid of you losing money; they are afraid that you understand their 'tricks'.
Want to survive and make money? Don't bet on the direction, bet on the rules.
If you want to walk more safely in the crypto world, follow me, avoid these pitfalls, and save yourself from taking detours!
