Cryptocurrency contract trading (leveraged trading) carries extremely high risks, with significant price fluctuations and inherent leverage amplification effects, which may lead to quick profits but are more likely to result in substantial losses or even liquidation. Below are core recommendations based on risk control, and must be approached with caution:
1. First clarify the situations where "contracts are not suitable"
If any of the following conditions apply, it is strongly advised to stay away from contracts:
- Participating with "essential living funds" (money that cannot be lost should absolutely not be touched);
- Completely unaware of the "leverage principle," "margin mechanism," or "liquidation rules";
- Emotions are easily uncontrollable (greedy when profitable, holding positions when losing);
- Having a mindset of "getting rich overnight" and wanting to rely on contracts for a turnaround.
2. Core principles that must be followed (lifesaving clauses)
1. Strictly control the leverage multiple
Beginners are advised to start with 1-5 times leverage (even using just 1 time to become familiar with the rules), and absolutely avoid high leverage above 20 times. The higher the leverage, the more even slight price fluctuations can trigger liquidation (for example, with 100 times leverage, a 1% price fluctuation can lead to liquidation).
Remember: Leverage is an "amplifier," which can amplify profits as well as risks, with 90% of liquidations stemming from high leverage.
2. The position of a single contract must not exceed 5% of the principal
Each time a position is opened, use no more than 5% of the principal as margin, reserving enough funds to cope with fluctuations. For example: with a principal of $10,000, each time the margin for opening a position should not exceed $500; even in the event of liquidation, the loss can be controlled within 5%, avoiding total depletion.