Except for the contracts with 1x leverage (equivalent to spot), any contract carries a liquidation risk.
The terrifying thing about contracts is that it is not a 50% win-lose gamble for bulls and bears; the risk of loss is greater. Moreover, the longer you hold, the greater the risk of loss.
Holding a contract for 1 month is basically a guaranteed loss, whether you go long or short.
As someone said, once you take leverage (contracts), time becomes your enemy.
The reason is the existence of the liquidation mechanism.
Looking back at historical data, you will find that at most time points, regardless of whether you go long or short, the trend will reach the liquidation point at some moment. In other words, the long-term trend is completely unrelated to contract players because you would have been liquidated before reaching that 'long term'.
For example, at a current price of 0.5, if you go long with 10x leverage, your liquidation point is 0.45.
Assuming you are optimistic about long-term development and your prediction is also correct, the price will rise to 2.5 in one year, a five-fold increase, and your 10x contract would earn you 50 times. But that is far in the future.
Assuming you were also correct in the short term, after going long for 5 minutes, the price rises to 0.55. It has increased by 10%, and with your 10x leverage, the return is 100%.
But the problem is that you cannot guarantee that price fluctuations will not drop to the liquidation point of 0.45. The longer the time, the greater the probability of dropping to the liquidation point. Moreover, a bear market is not necessary; it is sufficient for the price to suddenly plummet to 0.45 one day, and then immediately rise back.
After learning about turtle trading, I had an idea: contracts are tools that can only be used for quantitative right-side trading (trend trading). When using them, you must have a stop-loss, rather than betting against liquidation. Left-side traders who attempt to catch bottoms and tops can only use spot trading.
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