Contracts = High Risk, High Reward
Using a principal of 10,000 to play with 1000 times leverage can quickly amplify profits when the market rises:
Gain 10,000 by a 1-point increase
Gain 50,000 by a 5-point increase
Gain 100,000 by a 10-point increase
The temptation of achieving returns several times or even dozens of times in a few minutes is hard for many to resist.
However, if the direction is judged incorrectly, the losses brought by high leverage will be devastating.
Even if you fail nine times in a row, losing 10,000 each time, as long as you capture a 10% increase on the tenth time, theoretically you can recover all losses and have a slight profit.
But in reality, this idealized assumption overlooks the complexity and unpredictability of the market.
Since I can't persuade, I might as well share experiences of trading contracts to help friends trading contracts to suffer less losses and take fewer detours.
How to Avoid Liquidation: The key is strict management and control of positions.
Mindset Management: In contract trading, mindset is one of the key factors determining success or failure. Fear, greed, and hesitation can all affect decision-making. Successful traders not only need technical support but also a stable mindset and a profound understanding of the market.
Position Management: High leverage and full position operations are the main reasons for liquidation. Stick to half-position strategy to ensure there is enough buffer space to cope with market fluctuations. For example, when the price of LINK is $22, set the liquidation price at $11 to allow for sufficient reaction time.
Rational Use of Leverage: Lower leverage can effectively reduce the risk of liquidation. Ensure that there are enough funds to support even during significant price drops, avoiding forced liquidation.
The Importance of Intuition: When you feel that the market trend is wrong, decisively exit. This intuition is often the result of your subconscious quickly processing the information you have, which may save you at critical moments.
You must know that only those who can strictly manage and control their positions, possess a stable mindset, and have a profound understanding of the market can go further and steadier on the path of contracts.
Do you count as one of them?