Risk control is the only skill more important than being right about direction.
After rolling in the cryptocurrency contract market for so many years, I've seen too many 'myths' rise and fall. Most shooting-star traders fall not due to poor skills, but because they made a fatal mistake - they opened full position mode.
Today, I want to say something heartfelt to you, the novice: start your incremental trading and stay away from full position mode. This is not just advice, but your first line of defense for survival in the contract market.
Full position: The seemingly safe one-click zero-out trap.
In full position mode, every cent in your account becomes collateral, guaranteeing each position.
This sounds great—'Unity is strength'—but it actually means: a mistake in one position could wipe out your entire account.
Imagine you have $1000 in capital and use 20x leverage to go long with your entire account. If the price moves against you by just 5%, your account will be liquidated. There are no warnings, no reaction time; the system will force a liquidation, and your funds will evaporate instantly. Is this trading? This is simply Russian roulette.
Position-by-position: add a lock to risk.
The core advantage of position-by-position mode is risk isolation. You allocate a fixed margin for each position, and the profit or loss of this position will only affect this part of the funds, not the other assets in the account.
With the same $1000 capital, you only use $200 with 20x leverage to go long position by position. When the price moves against you by 5%, this $200 position may face liquidation, but you still have $800 safely lying in your account. You retain the spark for a counterattack and have the opportunity to start over.
More critically, position-by-position gives you the flexibility to adjust. When the price approaches liquidation, you can choose to add margin, reduce your position, or adjust your stop-loss point, rather than just watching your account collapse like in full account mode.
Leverage is not the devil; not knowing how to control it is.
Many people demonize leverage, but leverage is just a tool; the problem lies with the user.
In intraday short-term trading, if the fluctuation range is clear, you can consider 10-15x leverage, but be sure to ensure the liquidation price is at least 1.5 times the fluctuation range away from the day's highest and lowest points.
For swing or medium to long-term trading, you must reduce leverage. Daily fluctuations of 30% in popular cryptocurrencies are common; using 20x leverage in this case is akin to suicide. Reducing leverage to 3-5x will keep your liquidation price away from dense price areas, allowing you to survive even a black swan event until the next day.
My position-by-position practical strategy.
Before every position opening, I always ask myself three questions, which I also pass on to you as the 'Three Questions of Position Trading':
How far is the liquidation price from the recent key support and resistance? You must keep at least 1.5 times the normal daily fluctuation range to allow space for fluctuations.
Is my remaining capital enough for a few margin calls? Always leave enough ammunition for at least two margin calls; do not use up all your bullets at once.
Can this position allow me to sleep peacefully? If after opening a position, you are worried to the point of needing to watch the screen all night, it indicates that your position is too heavy or leverage is too high.
I will only press the trade button if all three answers are affirmative.
Survive and then win.
Contract trading is not about who makes the most money in one go, but about who survives the longest in the market. Survive, and profit will naturally follow.
Position-by-position mode may limit your 'get rich overnight' opportunities, but it greatly increases your chances of survival in this brutal market. For beginners, survival is more important than profit; making it through the beginner phase is a victory.
Based on my personal experience, I strongly recommend starting with position-by-position trading, testing the waters with low leverage, and only considering gradually expanding your scale once stable. On this road, living longer is the true winner.
I hope my experiences can help you avoid detours. The road is long, let's move forward steadily together. Follow Xiang Ge to learn more first-hand information and insights into the crypto world, becoming your navigation in the crypto space; learning is your greatest wealth!
