Three Common Misconceptions in Contract Trading and Corresponding Correct Practices:

Three Major Misconceptions:

Believing that long-term trading is better than short-term trading:

Many people mistakenly believe that long-term trading carries lower risks, thinking that as long as the market is favorable, profits will multiply. However, if the direction is wrong or a black swan event occurs, it can lead to liquidation, potentially wiping out all previous profits. Therefore, long-term trading is not always safe and requires a deep understanding and predictive ability regarding trends.

Believing that low leverage is very safe:

While low leverage reduces the risk of liquidation, it may also cause traders to react sluggishly to market changes. As losses gradually increase, traders may find it difficult to cut losses due to the sunk cost effect, ultimately still facing the risk of liquidation.

Preferring to trade altcoins:

Altcoins are highly volatile and can indeed bring high returns in the short term, but due to poor liquidity and susceptibility to manipulation, they can experience sudden price spikes or severe fluctuations, potentially wiping out all profits and even causing significant losses.

Correct Practices:

Seek a Stable Profit Model:

Choose assets with large market capacity and sufficient trading volume, such as BTC, as a prerequisite for long-term stable profits. The BTC market is relatively mature, capable of supporting large capital inflows and outflows, and its volatility is relatively controllable.

Appropriate Leverage Ratio:

Using appropriate leverage can amplify profits while also controlling risks. For larger capital, it is recommended that leverage does not exceed 10 times. Although low leverage has limited profit amplification effects, it can improve the margin for error and avoid significant losses due to small mistakes.

Reasonable Position Management:

Avoid full position trading when opening a position, unless there is a very high confidence in market trends. Additionally, blindly increasing positions during losses is a common mistake that can lead to more severe losses. Traders need to clearly understand when to increase positions and when to reduce positions to stop losses.

Correct Profit Taking and Stop Loss:

Failing to take profits in a timely manner is a reason many end up with losses. Greed may bring temporary high returns but also greater risks. As a conservative trader, it is essential to take profits at the right time to avoid excessive greed.

Cautious Trend Judgment and Position Opening:

Before opening a position, carefully assess the market trend to ensure the direction is correct. A correct trade should be easy and enjoyable; if you feel anxious or uncomfortable during the trading process, it may indicate improper operations, necessitating timely strategy adjustments.

By avoiding these misconceptions and adopting correct operational methods, traders can significantly increase their chances of profitability and maintain long-term survival and profitability in the market.

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