Contract liquidations? Actually, it’s because you don’t understand these things
After eight years of contract trading, I’ve summed up a principle: liquidations aren’t just bad luck—they happen because you didn’t do risk management properly.
These simple low-risk methods can completely change how you think about contracts
1. Don’t be afraid of high leverage—what matters is how much you put in: For example, use 100x leverage, but trade with only 1% of your principal. Your actual risk is about the same as buying spot with all your money, but only using 1% of it.
The core is: real risk = leverage multiplier × the position size ratio you invest.
2. Stop-loss isn’t a loss—it’s insurance for your account: During the market crash in 2024, 78% of the people liquidated had losses of 5% and still refused to set a stop-loss.
Experienced traders all agree on this hard rule: the loss from a single trade must never exceed 2% of your principal.
3. Calculate position size before you enter: Here’s a simple formula: the maximum you can invest must not be more than (principal × 2%) ÷ (stop-loss ratio × leverage multiplier).
For example, if you have 50,000 in principal and you can only accept a 2% loss, using 10x leverage means you can invest at most 5,000.
4. Take profit in three steps—don’t get greedy: Sell 1/3 when you’re up 20%, sell another 1/3 when you’re up 50%. If the price then drops below the 5-day moving average, sell everything.
In 2024, someone used this method to turn 50,000 principal into 1 million.
5. Spend a little money to buy “insurance”: When you hold a position, use 1% of your principal to buy a Put option (think of it as buying insurance). It can block up to 80% of sudden risk.
During that unexpected big drop in 2024, this saved 23% of the principal.
Whether you can make money from trading can actually be calculated: (win-rate × average profit per trade) minus (loss-rate × average loss per trade).
If your maximum loss per trade is 2% and you take 20% profit when you win—even with only a 34% chance of winning—you can still end up profitable.
Finally, remember these four iron rules:
Single-trade losses must not exceed 2% of principal;
No more than 20 trades per year;
Your profits must be at least 3 times your losses;
Don’t trade 70% of the time—wait for good opportunities.
Don’t trade based on emotions—follow the rules you set. That’s the key to making money consistently.
The market is always there—find your edge. With systematic thinking, I’ll take you through the fog of investing.
After eight years of contract trading, I’ve summed up a principle: liquidations aren’t just bad luck—they happen because you didn’t do risk management properly.
These simple low-risk methods can completely change how you think about contracts
1. Don’t be afraid of high leverage—what matters is how much you put in: For example, use 100x leverage, but trade with only 1% of your principal. Your actual risk is about the same as buying spot with all your money, but only using 1% of it.
The core is: real risk = leverage multiplier × the position size ratio you invest.
2. Stop-loss isn’t a loss—it’s insurance for your account: During the market crash in 2024, 78% of the people liquidated had losses of 5% and still refused to set a stop-loss.
Experienced traders all agree on this hard rule: the loss from a single trade must never exceed 2% of your principal.
3. Calculate position size before you enter: Here’s a simple formula: the maximum you can invest must not be more than (principal × 2%) ÷ (stop-loss ratio × leverage multiplier).
For example, if you have 50,000 in principal and you can only accept a 2% loss, using 10x leverage means you can invest at most 5,000.
4. Take profit in three steps—don’t get greedy: Sell 1/3 when you’re up 20%, sell another 1/3 when you’re up 50%. If the price then drops below the 5-day moving average, sell everything.
In 2024, someone used this method to turn 50,000 principal into 1 million.
5. Spend a little money to buy “insurance”: When you hold a position, use 1% of your principal to buy a Put option (think of it as buying insurance). It can block up to 80% of sudden risk.
During that unexpected big drop in 2024, this saved 23% of the principal.
Whether you can make money from trading can actually be calculated: (win-rate × average profit per trade) minus (loss-rate × average loss per trade).
If your maximum loss per trade is 2% and you take 20% profit when you win—even with only a 34% chance of winning—you can still end up profitable.
Finally, remember these four iron rules:
Single-trade losses must not exceed 2% of principal;
No more than 20 trades per year;
Your profits must be at least 3 times your losses;
Don’t trade 70% of the time—wait for good opportunities.
Don’t trade based on emotions—follow the rules you set. That’s the key to making money consistently.
The market is always there—find your edge. With systematic thinking, I’ll take you through the fog of investing.
