2026-01-09 02:29:05

Having traded derivatives for many years, I've seen too many people curse the sky and blame the market as soon as they get liquidated—blaming the market makers or the market itself—yet they refuse to look in the mirror. The truth is, liquidation is never just bad luck; it's a complete failure of risk management.

Today, I want to share some trading principles verified through real accounts that might change your understanding of derivatives trading.

**Leverage is not the culprit; position size is the real danger**

Many people instinctively fear 100x leverage, as if touching it would cause an explosion. In reality, high leverage itself isn't scary; the problem lies in how you use it.

The most critical formula is: Actual risk = Leverage multiple × Position size ratio.

Looking at it from another angle: Using 100x leverage but only opening a position with 1% of your total funds results in an actual risk exposure similar to holding 1% of your total funds in spot. Conversely, what's the most common way beginners get wrecked? Using 10x leverage with 50% of their capital in a heavy position, and a 2% price fluctuation can cause serious damage, making it impossible to hold out until the market reverses.

My personal rule is that each trade's principal should not exceed 5% of the total funds. Even with 50x leverage, the actual risk remains within a manageable range. This way, even if I lose several trades in a row, my account won't be wiped out.

**Stop-loss is an insurance policy, not a wasted cost**

I reviewed the recent major dip in 2024 in detail. Nearly 80% of liquidated accounts share the same trait—losing more than 5% but still stubbornly holding on, eventually being wiped out in one wave.

Experienced traders understand: a stop-loss is like paying for personal insurance. Setting a stop-loss isn't surrendering; it's giving your account a chance to survive.

The ironclad rule: Never risk more than 2% of your total funds on a single trade. For example, with a $100,000 account, never lose more than $2,000 in one trade, then work backward to determine where your stop-loss should be.

Don't think that setting a stop-loss means you'll miss out on a reversal. The reality is: very few traders who survive until the reversal actually get liquidated. Once your account is gone, no matter how good the reversal, it won't help you.

View Original

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.

12 Likes

Reward
12
7
Repost
Share

Comment

0/400

OnchainSniper

· 01-10 17:06

Really, those who blame the market makers every day—nine out of ten are actually just terrible at managing their own positions, but they still insist on blaming others. Stop-loss is basically spending a little to buy a life; you have to hold on until it explodes to be satisfied, right? I seriously remember the 5% ratio; it's much more reliable than those who boast about hitting a hundred times with a single bet. Last year, I didn't set my stop-loss properly, and as a result, I lost everything in one spike. Looking back, I really deserved it. Leverage itself isn't scary; what's scary is having a clouded mind. That's a statement that hits the mark.

View OriginalReply0

token_therapist

· 01-09 17:54

It's the same old story, hearing it so many times that it becomes numb, but it really hits the nerve. Looking in the mirror is truly brilliant; most people just refuse to admit they're bad at this. I've also derived this formula before; it seems simple but is actually deadly, and only a few can really execute it. I agree with the 5% position rule; the stability is completely different, but it really tests human nature. Setting a stop-loss means losing money, and many people can't get past this psychological barrier, and then it’s all over. Essentially, greed is still the culprit; this market game is all about feeding greed. Honest words are always hard to hear, but surviving is more important than making quick money. Unfortunately, many people know this truth but few actually do it.

View OriginalReply0

MelonField

· 01-09 02:59

Honestly, people who understand risk control have already made a fortune, while the rest are still gambling on luck. Finally, someone has explained this clearly—liquidation is really just shooting yourself in the foot. Stop-loss is like wearing a seatbelt; it's not redundant but a lifesaver. Every time I see those who boast without setting stop-losses, they deserve it. The 5% position rule I need to remember—it's much better than just randomly killing positions. Self-discipline is more important than leverage; there's no doubt about that.

View OriginalReply0

NFT_Therapy

· 01-09 02:51

Speaking harshly, I'm just afraid that most people won't listen. Honestly, seeing so many people lose everything and still keep shifting blame, I'm truly stunned. --- Position control is indeed the core, but I see that most people just can't hold back. --- As for stop-loss, even setting it now keeps me from sleeping well, constantly worrying about getting stopped out at the bottom, which makes me more anxious. --- Using 100x leverage with 1% position size sounds reasonable, but in practice, it's really difficult. Once you break even, you immediately want to add more. --- Wow, I also experienced that big drop in 2024; it was indeed the harshest. But there's a problem—setting stop-loss too tight might also make you vulnerable to being "harvested." --- After talking about risk management for so many years, only a tiny fraction can really do it. I myself am often just paying lip service. --- Every time I see posts like this, there's some truth, but as soon as I get into the market, I immediately forget all discipline, which is really ridiculous. --- Having 5% of your capital as a position is really stable, but with such a setup, you can't make much profit in a month, making it hard to stick with. --- Using a 2% stop-loss definitely helped me survive longer, but I missed too many doubling opportunities, and that also tests your mindset.

View OriginalReply0

EternalMiner

· 01-09 02:45

This guy is not wrong, it's just that too many people are unwilling to admit they are bad at trading. --- Damn, 50% capital with 10x leverage, isn't this just asking to die? --- Stop-loss, it's easy to say but really hard to do. --- Looking in the mirror hits hard; how many people just don't want to face their own incompetence? --- The 2% ironclad rule, many people know about it, but few actually follow through. --- Leverage itself isn't a sword; how to use it is the real issue. That's been made clear. --- Losing several times in a row but still not losing the account—that's the true way to survive. --- It looks simple, but very few traders can actually execute this logic. --- When the market reverses and there's no account, even the best strategies are useless. This reality is harsh.

View OriginalReply0

NFT_Therapy_Group

· 01-09 02:44

Really, I've seen too many people blame others when they lose, and they don't even want to seriously look at their position management. To put it simply, 100x leverage with 1% position size is almost the same as full-margin spot trading. Beginners insist on over 50% heavy positions, and then scream at 2% volatility. Serves them right. Stop-loss is truly a lifesaver, not a waste of money. The liquidation wave in 2024 was caused by those who couldn't hold out without setting stop-losses. I am convinced. If you manage your positions well, high leverage isn't scary at all. The problem is, no one is willing to honestly stick to 5% per trade. Keep single trade losses within 2%, and that's the only way to keep playing and surviving. Nothing else. Reversal markets and such, you have to survive until that moment to have the qualification to wait. If your account is gone, it's all just talk.

View OriginalReply0

WhaleWatcher

· 01-09 02:31

It's quite eye-opening, but I've seen too many people who understand these principles yet still die on position management, which is ridiculous. A 5% single trade allocation sounds simple, but when it comes to actual execution, it's a different story. What was said about stop-losses is correct; in 2024, I saw a bunch of people literally turn small losses into margin calls, and stubbornly holding on is truly a death sentence. Risk management may sound boring, but it's ironically the only way to survive. This set of rules can indeed stand the test of scrutiny, but the problem is most people simply can't follow through.

View OriginalReply0