Hello everyone, brothers and sisters.

In the last piece, I talked about the mindset and principles of spot trading. But I know that many people enter this circle not to hold spot for a few years, but to trade contracts.

In this circle, contracts are like Pandora's box. They can multiply your investment a hundred times in a week, or reduce it to zero in a minute, even leaving you owing money to the exchange.

In these 11 years, I have seen too many genius traders die from contracts, and too many ordinary people lose everything due to contracts. Today, I will specifically splash a bucket of cold water on contract trading and talk about how this industry should really be approached.

Let's continue to speak plainly, without all that fluff.

Part One: Mentality—Contracts are 'against human nature'.

1. Don't think of yourself as a 'gambling god'; you are just playing 'Russian roulette'.

Many people trade contracts, making 10% on the first day, 50% on the second day, immediately feeling like they are the next Soros, thinking the money is too easy to make, and even say that the exchange is an ATM.

The truth is: Making money in contracts is a process, while liquidation is the final result.

As long as you don't stop, as long as you keep playing, even if you win 99 times in a row, as soon as you encounter an extreme market (flash crash, 1011 black swan), you will go back to zero.

Mentality principle: Trading contracts is not about 'winning', but about 'surviving well'. Always remind yourself that you are snatching food from the tiger's mouth, not picking up money from the ground.

2. There are only 'strategies', not 'predictions'.

Every day when you open the market, you will see countless analysts shouting: 'It must go up!' 'It must go down!'

If your trading is based on 'I think', 'I see', 'I feel', you will undoubtedly fail.

Mentality principle: The market is unpredictable. Even if all indicators show an upward trend, the brokers can first dig a big pit before pulling up.

What you need to do is not predict whether it will rise tomorrow, but to establish rules: If it goes up, how do I chase it? If it goes down, how do I escape? Turn trading into a mechanical, emotionless execution.

3. Learn to accept 'being stopped out'.

This is the most painful. You opened a long position, set a stop loss, and the price just hit your stop loss, then immediately turned around and skyrocketed. You will be so angry you want to smash your keyboard, feeling like the market is targeting you, thinking the exchange has it in for you.

Mentality principle: Being stopped out is a cost of trading contracts, just like having to pay for gas when driving a taxi. As long as your strategy is correct, a single loss does not mean you were wrong. Never try to recover lost money by immediately doubling your position (this is called chasing losses); that is a fast track to hell.

Part Two: The 'Iron Laws of Life and Death' in Contract Trading.

1. Leverage is a double-edged sword; beginners should stay away.

Many exchanges default to giving you 150x—600x leverage, which is tempting you to commit suicide.

—100x leverage: You explode at a 1% fluctuation.—

—10x leverage: You explode at a 10% fluctuation.—

Practical advice: If you must trade, I recommend beginners start with 1x or 3x leverage. Don’t think that lower multiples make you earn less; lower multiples mean you have a stronger risk tolerance. In this market, surviving longer means you will naturally earn more; being able to accumulate is more important than needing to start over quickly!

2. Position management is key, not direction.

Even if you're right about the direction, if your position is too heavy, a small pullback can wash you out.

Practical advice: Even if you are very sure about the market, do not open positions exceeding 5%-10% of your total capital.

For example, if you have 10,000 U, the maximum single trade should be 500-1000 U. That way, even if you get stopped out 5 times in a row, you still have more than half of your principal left, with a chance to turn things around. If you go all in, one mistake means Game Over.

3. Stop losses are the bottom line; absolutely do not touch them.

Trading contracts, stop losses are your 'fuse'.

Strictly prohibit moving stop losses to increase losses: If you lose, you lose; don't think about 'holding on a bit longer' and moving your stop loss back. Extreme market conditions (flash crash) can cause you to be liquidated instantly.

Strictly prohibit trading without stop losses: As long as you don’t have a stop loss, even if you profit 99 times, the 100th time you encounter a black swan, you will lose both your principal and profits, or even owe money to the exchange (liquidation).

4. Go with the trend, don't try to catch a 'falling knife'.

This is a common mistake made by many seasoned traders. Seeing a large bearish candle coming down, they think 'it has dropped so much, it must bounce back', and they rush in to go long.

The truth is: In contracts, the power of trends is terrifying.

Practical advice: Do not try to guess the top or bottom.

- In an uptrend, only go long, not short (or short lightly).

—In a downtrend, only go short, not long.—

- Do not try to catch a falling knife; your hand will get cut. Wait until the knife hits the ground and bounces back before you pick it up.

5. Take profits when you can; don’t strive for a 'perfect exit'.

Many people lose money not because they don't make any, but because they are too greedy. After making 10%, they want 20%; after making 20%, they want to double it. As a result, the market reverses, and not only do they lose their profits, but they also lose their principal.

Practical advice: Learn to take profits in batches.

For example, if you make 10%, first close half of your position to get your principal back. Use the remaining half to 'trailing stop' along with the market; if the market goes up, you profit, and if it goes down, you still protect your principal.

Never expect to sell at the highest point; being able to catch a fish's body is already a master.

Brothers, this thing called contracts is essentially a zero-sum game. Every penny you earn is a penny someone else loses; every penny you lose goes into someone else's pocket.

On this battlefield, your opponents are the brokers and quantitative funds with supercomputers, unlimited funds, and insider information.

If you must trade contracts, please remember my words:

Treat contracts as a form of 'practice', not 'gambling'. Strictly control your position, strictly follow the rules. If you find yourself starting to get anxious, even affecting your sleep or losing emotional control, stop trading immediately, turn off the computer, and go for a walk.

As long as there are green mountains, there’s no need to worry about firewood. Don't risk your life for a few broken U!