How many times leverage is better for Perptual Futures?
How many times should you open a Perptual Futures contract to be reasonable!
Before answering this question, let me briefly explain what Perptual Futures are. Perptual Futures, as the name suggests, are contracts that are valid indefinitely. In the current digital currency derivatives trading market, Perptual Futures can be considered a relatively new type of contract. The meaning of Perptual Futures is that, under the premise of not being liquidated, if you do not actively close your position, you can hold this contract indefinitely. So, how much leverage is reasonable when trading? Someone asked me this question yesterday, so I will discuss it today.
Yesterday, I was discussing with a crypto friend that he usually uses 50x leverage or 30x leverage. Taking Bitcoin as an example, 30x leverage requires 16U, 50x leverage requires 10U, and 100x requires 5U. Under the same market conditions, my personal suggestion is to only use 100x leverage. Why? Because once you use leverage in trading contracts, whether it's 1x or 100x, it carries leverage risk. The returns generated with 1x leverage and those with 100x leverage are vastly different under the same market conditions. Some might say that 1x leverage has smaller risks, which is true about the risk aspect. However, taking Bitcoin as an example, if you use 1x leverage, currently one contract requires over 470U. Without significant price increases, you are definitely at a loss due to transaction fees, and even if you do make a profit without a large increase, it won't be substantial. What I want to express is that since you've chosen to trade leveraged contracts, you should maximize the use of that leverage and only use 100x leverage.
In many cases, what is it like to hold thin funds and engage in contracts that do not match the current capital? With little margin, it cannot support the current market conditions, and it may be pulled back and forth in a volatile market, leading to liquidation during fluctuations. Later on, when a profitable market comes, it has nothing to do with you. At this point, the contracts we hold become invalid. Therefore, when engaging in Perptual Futures, under permissible conditions, we should prepare a bit more margin for ourselves, as it is better to be safe than sorry. Regardless of the investment we make, there are risks involved. What we need to do is minimize those risks and then look at the benefits. Holding onto losing positions is a big taboo in contract trading, and cutting losses in a timely manner is very necessary.
Timely cutting losses, combined with the isolated margin mode to minimize risk, do not joke with your own principal, set a daily target for yourself, and when you achieve the target, take profit promptly; contracts will become very simple. Friends who have been involved in contracts know that if you have 5000U as your capital, making a profit of 50-100U daily is very simple. Adding some methods makes it even simpler. If you make a profit of 50-100U a day, how much is that in a month? 1500-3000U! Of course, in actual operations, you may encounter large market fluctuations or various unexpected events. Compromising, if we consider a month of 30 days, as long as you achieve your daily target for 20 days, you are still profitable. After saying so much, I hope it can help fellow traders.