Many people lose money in contract trading, and the problem is often not about predicting the market direction correctly, but about not fully understanding the rules. Today, I will explain the common pitfalls in contract trading.

First, let's talk about the hidden cost of funding fees. Someone might be completely correct about the market direction, but over four days, they could have paid over 1000 USDT in funding fees and end up forced to close their position. Remember, funding fees are settled every 8 hours, and the rates can be positive or negative. Holding a full position and stubbornly resisting can drain your margin even in the right direction, leading to liquidation. How to avoid this? Enter during periods with low or even negative funding rates, check your position before 8 hours, or directly take the opposite side of the funding fee, which can actually pay you.

The second pit is miscalculating the liquidation price. Don't naively think that a 10x leverage will be liquidated only if the market drops 10%. In reality, after the platform adds liquidation fees, you might be liquidated after a 5% drop. As a result, multiple long positions at the front get liquidated together. The key is not to use full leverage; use isolated margin mode to leave yourself a buffer, and keep leverage between 3x and 5x to leave enough margin for safety.

Finally, let's talk about the truth of high leverage. 100x leverage looks exciting, but fees and funding costs are calculated based on the total borrowed amount. In the end, the small profits you make might not even cover the costs. Instead, high leverage is better suited for short-term trading, while lower leverage is better for holding positions. This way, you can seize opportunities without being killed by the rules.

The contract market is constantly changing. Don't just focus on betting on the right direction—first, understand these rules. Avoiding these pitfalls a few times can double your returns.