The First Lesson of Perpetual Contracts: It's Not the Win Rate That Determines Profit and Loss, But This Number

Many beginners who first come into contact with perpetual contracts hold a simple idea: just guess whether it will go up or down, it's either right or wrong, at least there is a 50% chance of winning. This seemingly reasonable thought is precisely the starting point for countless people facing liquidation. They frantically study various technical indicators, chasing magical methods that can bring "high win rates", while ignoring a more fatal truth.

What ultimately determines whether you make a profit or a loss is never just how many times you were right, but the ratio between "how much you earn when you're right" and "how much you lose when you're wrong." This is the crucial concept in trading –【Profit and Loss Ratio】

Imagine a simple game: you continuously flip a fair coin. Heads, you win 2 units; tails, you lose 1 unit. Your win rate is still 50%, but if you play long enough, you will definitely make a steady profit. Conversely, if you win 1 unit on heads and lose 2 units on tails, even with the same win rate, you are destined to go bankrupt.

This is a cruel microcosm of the perpetual contract market. Many common actions of beginners are: as soon as they make a small profit (for example, earning 100U), they rush to close the position to secure their gains, but once they are wrong on direction, they are reluctant to cut losses, holding on with a glimmer of hope, leading to continuous losses (eventually possibly losing 500U or even more). They may have a high "win rate" during a certain period, making ten trades and getting seven or eight right, but just one or two huge losses are enough to swallow all profits and endanger the principal.

Therefore, for beginners, the primary mindset shift when entering this market is not to seek an eternally correct "Holy Grail", but to establish a clear understanding of "asymmetrical amounts of winning and losing". Successful traders often focus more on how to control the cost of each mistake through strict stop-loss measures and let the correct trades run as much as possible to amplify profits. What they pursue is not victory every time, but a profit model that is based on mathematical advantages and can be repeated over the long term.

Remember, in this market, living long is far more important than winning frequently in the short term. The key to your long-term survival lies in the profit and loss ratio of each of your trades.