How Have I Seen Through the Traps in Contract Trading?

The rules of the game are harsh, but the market is always full of temptations. If you don’t understand the rules clearly, don’t blame the market for being indifferent. A few days ago, a follower sent me a “painful” story: He correctly identified the trend and held the position for four days, but his account still got wiped out. Not because the price went against him, but because the funding fee silently drained over 1,000 USDT. The most bitter part is that just a few hours after liquidation, the price rose straight to his initial target. This scenario happens every day in the derivatives market. Many people don’t lose because of bad analysis, but because they don’t understand the rules of the game. Today, I will share from my real trading experience to expose the most dangerous traps in derivatives trading. Trap One: Funding Fee – The Ruthless Harvesting Machine Most traders only focus on price charts and technical indicators, forgetting a silent assassin: (funding rate). The essence of the funding rate is a kind of “emotional regulation tax” between Long and Short positions. When the market is overly euphoric, everyone is Long → positive funding → Long pays Short. When the market is pessimistic, everyone is Short → negative funding → Short pays Long. My followers made a fatal mistake: holding Long positions during high positive funding periods. When funding reaches 0.1%, a full-margin Long order can lose 0.3% of capital each day (because of 3 funding calculations). The number sounds small, but after just a few days: Capital erodedLiquidation price pushed close to market priceA slight shake can wipe out the account How I Avoid the Funding Trap: Avoid extreme funding periods: if funding > 0.08% continuously for 2 cycles, I reduce position size or hedgeTake advantage of negative funding: Long during negative funding phase to both ride the wave and "get paid"Do not hold positions for more than 3 funding cycles unless truly necessary Trap Two: Liquidation Price – Fake Safety Zone “I use 10x leverage, theoretically I should only get liquidated if I drop 10%, why am I being liquidated after only 5% drop?” This is the most common question I hear from beginners. The truth is, the actual liquidation price is always more brutal than theory. Exchanges will: Deduct liquidation fees Tighten safety margins during high volatility Liquidate early to protect the system Especially during low liquidity hours (at night, before expiry), just a small “pull-out – wick sweep” is enough to wipe out seemingly safe orders. How I Manage Liquidation Risks: Always use isolated mode (to separate) to avoid affecting the entire accountAfter calculating the liquidation price, I always leave a 3% buffer zone for stop-lossAvoid holding positions within 3 hours before contract expiry Trap Three: High Leverage – The Poisoned Candy 100x leverage sounds extremely attractive: just a 1% price move doubles the account. But high leverage also means a hanging death sentence. The biggest illusion of high leverage is: “I will cut losses in time.” In reality: Slippage (slippage)Order execution delayFunding + trading fees are calculated on the entire position value, not the invested capital All these make stop-loss meaningless during strong volatility. My Leverage Principles: Major coins (BTC, ETH): no more than 5xAltcoins: no more than 3xDay trading can use higher leverage, but overnight must reduce to ≤ 5xNarrower stop-loss → lower leverage Trap Four: Trading on Emotions – The Most Dangerous Assassin FOMO (fear of missing out) and FUD (fear, uncertainty, doubt) are the two biggest demons for derivatives traders. From my personal statistics, I see: Night trading has about 40% higher error rateIn my worst 3 months of losses, 72% of losing trades came from impulsive trading Common points of these trades: No planCaught up in short-term volatilitySelf-sabotaging discipline How I Control Emotions: Apply “cooling-off time”: if I want to enter a trade → wait at least 30 minutesAll trades must have: entry point – stop-loss – take profit – position sizeAfter 11 PM, I rarely open new trades, only manage pre-set conditional orders Conclusion: Don’t Bet Against Price, Understand the Rules The biggest secret of the derivatives market is: Exchanges are not afraid of you making money; they only fear you understanding the rules. Because only those who understand the rules survive long enough, and long-term players are the most valuable customers. That trader whose account got burned finally realized: “It’s not that I was wrong about the trend, but I underestimated the rules of the game.” Before each trade, ask yourself: Is funding supporting or opposing me?Is the liquidation price safe enough?Is leverage too high?Is my current psychology clear-headed? In this market, survival is more important than correct predictions. The long-distance traveler is the ultimate winner.