A thorny rose, looking tempting but actually dangerous.
In March 2020, that was a night I will never forget. The financial panic triggered by the pandemic swept the globe, and the crypto world also faced a 'black swan,' with BTC plummeting 20% in a single day.
At that time, I naively thought, 'The bottom-buying opportunity has arrived.' With a principal of 200,000, I opened a 5x long contract without a second thought, not even setting a stop-loss.
The result was predictable; that night BTC fell by another 15%. I watched helplessly as my account balance went to zero, losing 200,000 altogether. Sitting in front of the computer until dawn, I finally understood: in the crypto world, contracts are not a tool for 'quick profits,' but a tiger that devours the principal.
Five years have passed, and I have summarized three 'survival rules' from my painful lessons, which I will share with you today without reservation.
1. Position size determines life and death; never go all in.
The first fatal mistake I made was over-leveraging. A 200,000 capital opening a 5x contract is equivalent to fighting in the market with 1,000,000; once you go wrong in direction, there's no room to maneuver.
Now my first iron rule is: position size must never exceed 10% of total capital. For example, if you have 100,000 capital, you can open a contract with at most 10,000. It may seem conservative, but it allows you to survive in extreme market conditions.
Leverage is also a major trap. Many people light up at the sight of '100x leverage', but they don't realize that with 100x leverage, if the price moves against you by just 1%, you'll get liquidated. I strongly recommend beginners start with 2-5x leverage; even if your judgment is wrong, you'll have enough time to react and cut losses.
2. Stop-loss and take-profit are seatbelts, not decorations.
Not setting a stop-loss is like driving without a seatbelt; you might not feel anything on ordinary days, but when something goes wrong, it’s a big deal.
My second survival rule is: you must set 'dual stop-loss and take-profit'. When going long, set a 'stop-loss below the support level', and when going short, set a 'stop-loss above the resistance level'. For example, if you open a long BTC position at 10,000 with a support level at 30,000, set a stop-loss at 29,000, and if it profits to 32,000, set a take-profit at 31,000.
Don't rely on 'feelings' to hold positions; the market won't change direction because of your expectations. Data shows that among users who trade more than 5 times a day, 90% incur losses exceeding 60% that month. Discipline is the most valuable quality in contract trading.
3. The trend is your friend; don’t go against the market.
The third mistake I made back then was going against the trend. BTC had clearly broken a key support level, yet I was fixated on 'buying the dip', and as a result, I was harshly educated by the market.
My third rule now is: never go against the trend. When BTC clearly breaks below the 5-day moving average, don't stubbornly go long. The trend is far more important than 'buying the dip'. There are always opportunities in the crypto space, what’s lacking is the patience to wait for the right opportunity.
According to data from the crypto market website Coinglass, during a recent crash, the Bitcoin contract open interest reached a historical high of $39.46 billion, and subsequently, price corrections liquidated a large number of positions and triggered a chain liquidation. Going with the trend is the choice of smart investors.
Now I: slow is fast, stability is winning.
By following these three rules, I now occasionally trade contracts, using only 5% of my capital. Last year, I opened a 3x ETH long position with 10,000, strictly following the rules for stop-loss and take-profit, and in six months I made 20,000. Although slow, it is steady.
True contract experts are not those risk-takers chasing hundredfold returns, but disciplined executors who can consistently control risks and generate steady profits.
In the crypto world, staying alive is more important than making quick money; retaining your capital gives you another chance. After all, the market always has opportunities, but capital is limited.
I hope my lessons can help you avoid detours. Remember, in this market, truly smart people never 'bet big' on contracts, but instead lock in risks with rules.
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