If you can't calculate the liquidation line, you are just someone else's ATM.
The backend crashed again, and a bunch of messages are asking how much leverage is appropriate for perpetual contracts. I've answered this question for five years, from bull markets to bear markets; newbies fall into traps, and veterans also get wrecked.
Let me pour a bucket of cold water: leverage is not a money printer; it's a kitchen knife. It's easy to cut vegetables, but a little tremor can draw blood.
Perpetual contracts have no expiration date; as long as you don't get liquidated, you can hold on indefinitely. Sounds free, right? But this freedom is full of pitfalls: you can increase your position at any time, wanting to chase profits when you gain, and wanting to hold on when you lose. The temptation of doubling your earnings with leverage clouds your mind, and the risks have long been forgotten.
Last week, a friend in crypto told me he usually uses 30 to 50 times leverage. I asked him why he doesn’t try 100 times, and he rolled his eyes: 'It blows up too quickly, there's no time to run.' I laughed out loud—using leverage is like walking on a tightrope; 50 times is a slow knife cut, 100 times is a quick knife slash, the difference is just how many seconds the market gives you to react.
01 The essence of leverage, 90% of people misunderstand.
Many people think that the leverage multiple is a symbol of courage, as if not using 100 times is embarrassing to say they are trading contracts. But leverage is essentially a math problem; those who can't clearly calculate the liquidation line will eventually become fuel for others.
Taking BTC as an example, when the current price is 47,000U: opening 30 times leverage requires about 16U margin; opening 50 times requires 10U; and opening 100 times only needs 5U.
It seems that 100 times is the most 'cost-effective,' using the least money to leverage the largest positions. But there’s a fatal trap: when BTC price reverses by 1% (470U), the 5U margin at 100 times leverage will be completely wiped out. That’s why it’s said that '100 times leverage is poison for gamblers.'
The true logic of leverage should be: leverage multiple = (account principal × safety margin) ÷ (target price × volatility coefficient), not just picking the largest number based on feeling.
02 Survival rules for different amounts of capital.
I've seen 'brave' individuals open 100 times leverage with 500U principal, only to get liquidated when BTC fluctuated by 2%. Different amounts of capital mean completely different strategies.
Small funds (<1000U): 10-20 times is the line between life and death.
Opening 10 times leverage with 500U principal, each position not exceeding 20% of the principal, set the liquidation line outside the opening price ±8%. This is the survival rule for small funds: use lower leverage for a wider safety cushion.
Medium funds (1000-10000U): 5-10 times is a balancing act.
When the principal reaches 5000U, the leverage strategy should shift from 'survival' to 'balance': open 5 times leverage, with each position not exceeding 30% of the principal, and set a trailing stop-loss (automatically liquidate if the opening price drops by 3%).
Large funds (>10000U): 1-3 times is the way.
Real institutional players rarely use high leverage. MicroStrategy only uses 2 times leverage when shorting BTC because the liquidation line for 1 times leverage is outside the opening price ±50%, and for 3 times leverage, it's outside ±16.6%.
03 The truth about liquidation is not high leverage but...
The real reason many people get liquidated is not high leverage but mismatched positions and insufficient margin.
Holding a few hundred U principal but wanting to leverage tens of thousands U in positions, once the market fluctuates slightly, you will be swept out. The worst pain is not misreading the market but being correct about the direction yet being washed out by a small fluctuation due to over-leveraging.
Assuming you open a long position with an opening price of 47,000U, a margin of 10U, and a maintenance margin rate of 0.5%. The liquidation price = opening price × [1 - (margin × (1 - maintenance margin rate)) / (number of contracts × contract face value)].
Calculate this formula, and you'll know where your liquidation line is. In the world of perpetual contracts, those who survive are never the bold ones, but the ones who can calculate clearly.
04 Counterintuitive operations: What to do during a crash?
When BTC plummeted by 3% last year, the entire network liquidated 711 million dollars, affecting 210,000 people. However, smart players were doing three things:
Reduce leverage 2 hours before a crash: from 100 times to 20 times; set a tiered stop-loss: liquidate 20% of the position for every 1% drop; keep 50% cash ready for margin addition.
Leverage operation iron rules checklist:
🚫 Never open positions exceeding 20% of the principal.
⏳ Calculate the liquidation line and take a screenshot before each position.
📉 When the price fluctuates more than 5%, the margin must be recalculated.
⚖️ Leverage multiple = 1/(expected maximum drop × 2)
05 My personal experience: Can high leverage also be safe?
This may overturn your understanding: controlling risk at 100 times is much safer than 5 times without a stop-loss.
In my personal view, since you've chosen to trade leveraged contracts, you must maximize the utility of leverage. Sometimes, under the same market conditions, 100 times leverage is more suitable than lower leverage.
But the premise is, you must have a complete risk control system: using a segmented model to isolate risks; setting strict stop-losses to avoid holding positions; ensuring sufficient margin to withstand normal fluctuations.
Leverage is like driving; high leverage is a sports car, while low leverage is a family car. Driving a sports car requires higher skills, not just bigger guts.
Conclusion: Surviving is more important than anything else.
Before considering opening 100 times leverage, calculate clearly on paper: If the coin price drops by 3%, where is my liquidation line? How much principal will my account still have?
Leverage does not magnify profits; it magnifies your greed and discipline. Being greedy when making money and refusing to admit defeat when losing is the fundamental reason for liquidation.
Set reasonable goals: 5000U principal, earn 50-100U daily, and in a month of 20 days, that's 1000-2000U profit. Don't underestimate this goal; compound interest is the most powerful weapon.
In the world of perpetual contracts, leverage is not the devil; greed is. The market always has opportunities, but your principal is only once. Survive, and you can leave with a smile.
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