What are the risks of liquidation in perpetual contracts?

1. Plug-in behavior: This is very common and can be found in all major exchanges. It is said to be caused by technical problems, but many people also speculate whether it is the exchange’s own behavior and it is difficult to judge.
2. Uncontrolled and continuous increase in positions: When placing an order for a perpetual contract for the first time, everyone generally has a clearer understanding of the price position of the liquidation after placing the order. However, many people only see the liquidation position of the first order and have not considered the liquidation position after increasing their positions. Therefore, liquidations in this scenario are very common.
3. Distorted mentality of recovering capital: After the perpetual contract suffers losses, many people will have serious problems with their mentality. Suppose you lose 100U, you may hope to recover your capital immediately, so you impulsively place an order again, resulting in a loss of 200U. Then your mentality continues to be unbalanced, resulting in a loss of 400U. If this continues, you may not get your position liquidated many times because you are lucky enough, because just like gambling, you will guess right once in 10 times, so in most cases you will not get your position liquidated. However, if your position liquidated, you will lose a very large amount of money, resulting in all your previous efforts being wasted.
4. Margin Call in Stable Market: One principle of the contract is not to hold the order for too long. The perpetual contract is not a long-term investment financial product, it is a financial derivative, so it is best not to hold it for more than 3 days, unless you have already made a profit. If you exceed 3 days and you are still closing the position or losing money, it is recommended that you close the position as soon as possible and then find an opportunity to make up for it.
5. Short or long: In a continuous decline or rise, if there is a sudden drop or rise in volume, many people will go short or go long. For example, if the 15-minute/30-minute/1-hour K-line or RSI is falling, and then there is a sudden drop in volume, many people may go short, resulting in a large-volume rise and a liquidation. #BTC