How much leverage is reasonable for perpetual contracts! $ETH $BTC

Before answering this question, let me briefly explain what a perpetual contract is. A perpetual contract, as its name suggests, is a contract with a perpetual renewal period. In the current cryptocurrency derivatives trading market, perpetual contracts are considered a relatively new type of contract. The meaning of a perpetual contract is that, under the premise of not being liquidated, if you do not actively close your position, you can hold this contract indefinitely. So how much leverage is reasonable when trading? Someone asked me this question yesterday, so I’ll talk about it today.

Yesterday I discussed with a fellow trader, and he usually uses 50x leverage or 30x leverage. Taking Bitcoin as an example, 30x leverage requires 16U, 50x leverage requires 10U, and 100x requires 5U. In the same market conditions, my personal suggestion is to only use 100x leverage. Why? Because once you use leverage in contracts, whether it’s 1x or 100x, you are taking on leverage risk. In the same market conditions, the returns from 1x leverage and 100x leverage are vastly different. At this point, some may say that the risk of 1x leverage is smaller, which is true, but taking Bitcoin as an example, if you use 1x leverage, currently one contract requires over 470U. Without significant price increases, you will definitely incur losses, as there are transaction costs involved. Moreover, even if there is a small profit without significant price increases, it won’t be much. What I want to express is that since you have chosen to trade with leveraged contracts, you should maximize the use of this leverage and only use 100x leverage. In many cases, what happens is that traders use thin capital to engage in contracts that do not match their current funds. With little margin, they cannot support current market conditions, which may lead to liquidation in a slightly volatile market. Later, when a profitable market comes, it has nothing to do with you, and at that point, the contracts we hold become invalid. Therefore, when trading perpetual contracts, under the conditions that allow it, we should adequately prepare more of our margin as a precaution. Regardless of what investment we make, there are risks involved. What we need to do is to minimize those risks and then look at the benefits.

I generally find ave reminders quite useful.