Replacing luck with risk awareness is the first rule of survival in contracts.
Another wave of bloodshed! The past November saw Bitcoin's monthly decline of nearly 20%, with over 190,000 people across the network liquidated, and the total liquidation amount reaching 553 million US dollars.
Looking at these numbers, my thoughts went back to that unforgettable night three years ago. At that time, I had just entered the circle, and with a bit of luck, I made some profits in the contract market, thinking I had grasped the secret to wealth. As a result, a sudden 'flash crash' caused my 200,000 principal to go to zero in half an hour — merely because the exchange suddenly crashed, and I was unable to take any action.
This pain, I believe many friends who trade contracts deeply understand. But today, I'm not here to tell a sad story, but to share how to learn lessons from repeated liquidations and ultimately achieve three years of trading experience without liquidation.
Leverage is not the devil; uncontrolled positions are.
Most people’s first reaction when it comes to contract trading is 'leverage is too high, risk is too great.' But the truth is, leverage itself is just a tool; the real fatal issue is improper position management.
For example, using 1% of the position with 100x leverage, the actual risk is only equivalent to 1% of a full spot position. However, with 10x leverage and over 50% of the position, your risk is 50 times that of the former!
I have a student who trades ETH with 20x leverage but only invests 2% of the total principal each time. Over three years, even after experiencing multiple extreme market conditions, he still maintains a zero liquidation record. The core formula is simple: real risk = leverage × position ratio.
Stop-loss is a seatbelt, not an ornament
In a crash in March 2024, data shows that nearly 78% of liquidated accounts share a common characteristic: they do not set stop-losses even after losing more than 5%.
Professional traders have a strict rule: single losses must not exceed 2% of the principal. This is like setting a 'circuit fuse' for your account, automatically cutting off risk before the market shorts out.
In my own trading system, stop-loss is not optional, but a necessity. Stop-loss does not mean failure; it means you still have the capital to make a comeback.
Rolling positions is not gambling; compound interest requires a gradual approach.
Many people misunderstand rolling positions as continuously increasing the stake until everything is on the line. This is the greatest misunderstanding of compound interest.
The correct rolling position model should be: the first position is 10% for trial and error, then use 10% of the profit to increase the position. For example, with a capital of 50,000, the first position is 5,000 (10x leverage), and for every 10% profit, add 500 to the position. When BTC rises from 75,000 to 82,500, your total position only increases by 10%, but the safety margin improves by 30%.
My institutional-level risk control model
After years of practice, I have summarized a risk control model suitable for ordinary traders:
Dynamic position formula: total position ≤ (principal × 2%) / (stop-loss range × leverage). For example, with a capital of 50,000, 2% stop-loss, and 10x leverage, the maximum position is calculated as 50000 × 0.02 / (0.02 × 10) = 5000.
Three-stage take-profit method: close 1/3 of the position at 20% profit; close another 1/3 at 50% profit; set a trailing stop for the remaining position (exit when breaking the 5-day line). In the halving market of 2024, this strategy allowed some flexible traders to achieve considerable profits.
Hedging insurance mechanism: use 1% of the principal to purchase Put options while holding positions, which can hedge most extreme risks. In the black swan event in April this year, this strategy successfully saved 23% of my account's net value.
Beware of these deadly traps
According to market data, several behaviors significantly increase the probability of liquidation:
Holding a position for over 4 hours: the probability of liquidation increases to 92%;
Overtrading: an average of 500 operations per month can lead to a loss of about 24% of the principal;
Greed in profits: among accounts that did not take profits in time, 83% eventually gave back most of their profits.
The essence of trading is mathematics
Expected profit value = (win rate × average profit) - (loss rate × average loss). When you set a 2% stop-loss and a 20% take-profit, you only need a 34% win rate to achieve positive returns.
Professional traders achieve sustainable returns through strict stop-losses (average loss of 1.5%) and trend capturing (average profit of 15%). Behind this is strict discipline:
Single loss ≤ 2%
Annual trades ≤ 20
Profit-loss ratio ≥ 3:1
70% of the time waiting in cash.
The final heartfelt words
In the contract market, what we need is risk awareness, not luck; patience, not impulsivity. Currently, cryptocurrency trading activities in our country are considered illegal financial activities, and participating in them poses extremely high policy and legal risks.
If you still decide to take this path, please remember: never trade with money you can't afford to lose, never over-leverage, and never stop learning on your trading journey.
The market will never lack opportunities, but your principal may only have one chance. Protect it well, so you can survive in this market long enough to wait for the opportunity that truly belongs to you.
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