Why Do Contracts Always Liquidate? It’s Not Bad Luck; You Simply Don’t Understand the Essence of Trading! This article condenses a decade of trading experience into low-risk rules that will completely overturn your understanding of contract trading – liquidation is never the market's fault, but a time bomb you set yourself.
Three Major Truths that Disrupt Perception
Leverage ≠ Risk: Position Size is the Lifeline
With 100x leverage and 1% position size, the actual risk is only equivalent to 1% of a fully funded position in #Bitcoin. A student used 20x leverage on ETH, investing only 2% of their capital each time, with three years of no liquidation. Core formula: Real Risk = Leverage Ratio × Position Size.
Stop Loss ≠ Loss: The Ultimate Insurance for Your Account
In the 2024 March 12 Crash, 78% of liquidated accounts shared a common trait: losses exceeding 5% without setting a stop loss. Professional trader's iron rule: Single loss must not exceed 2% of capital, akin to setting a 'circuit fuse' for the account.
Rolling Positions ≠ All In: The Correct Approach to Compound Interest
Ladder Positioning Model: First Position 10% for Trial, Use 10% of Profits to Add to Position. 50,000 Capital with First Position of 5,000 Yuan (10x Leverage), Add 500 Yuan for every 10% profit. When BTC rises from 75,000 to 82,500, total position only increases by 10%, but safety margin increases by 30%.
Institutional-Level Risk Control Model
Dynamic Position Size Formula
Total Position Size ≤ (Capital × 2%) / (Stop Loss Margin × Leverage Ratio)
Example: 50,000 Capital, 2% Stop Loss, 10x Leverage, Maximum Position Size = 50000 × 0.02 / (0.02 × 10) = 5000 Yuan
Three-Stage Take Profit Method
1) Close 1/3 at 20% profit 2) Close another 1/3 at 50% profit 3) Move stop loss on remaining position (exit if below the 5-day moving average)
In the 2024 Halving Market, this strategy increased a capital of 50,000 to a million during two trends, with a return rate exceeding 1900%.
Hedging Insurance Mechanism
Using 1% of capital to purchase Put options while holding a position can hedge against 80% of extreme risks. In the April 2024 Black Swan event, this strategy successfully salvaged 23% of account net worth.
Deadly Trap Empirical Data
Holding a Position for 4 Hours: Probability of Liquidation Increases to 92%
High-Frequency Trading: Average 500 Operations Per Month Consuming 24% of Capital
Profit Greed: 83% of profits receded due to untimely profit-taking.
Four, Mathematical Expression of Trading Essence
Expected Profit = (Win Rate × Average Profit) - (Loss Rate × Average Loss)
When setting a 2% stop loss and 20% take profit, only a 34% win rate is needed to achieve positive returns. Professional traders achieve over 400% annualized returns by strictly enforcing stop losses (average loss of 1.5%) and capturing trends (average profit of 15%).
Ultimate Rule:
Single Loss ≤ 2%
Annual Trading ≤ 20 Transactions
Profit and Loss Ratio ≥ 3:1
70% of the Time in Cash Waiting
The essence of the market is a probability game; smart traders risk 2% to seize trend benefits. Remember: Control losses, and profits will run free. Establish a mechanical trading system to let discipline replace emotional decision-making, which is the ultimate answer for sustained profit.
