Having traded derivatives for many years, I've seen countless people get liquidated overnight, and also a few who become more stable over time. Later, I realized that people who lose money often fall into the same trap—completely failing to understand the relationship between leverage and position size.

**It's not that high leverage will kill you, it's that you don't know how to manage your position**

Many people get scared when they hear about 100x leverage, but that's actually a false problem. You can open a position with 100x leverage but only invest 1% of your total funds; the actual risk is no different than investing 1% of your capital with 1x leverage. Remember the core formula: Actual risk = Leverage multiple × Position size ratio. That’s the key.

**Stop-loss is life-saving; learn from the blood and tears of 2024**

During last year's market crash, the data was quite shocking: 78% of liquidated traders were actually holding on despite losing 5%, eventually getting caught and liquidated. My trading discipline is firm—never risk more than 2% of your principal on a single trade. Once that limit is reached, stop trading for the day. Many think this is too conservative, but in the long run, staying alive is what makes you a winner.

**Calculate your numbers before opening a position**

This is a simple calculation: Investable amount ≤ (Principal × 2%) ÷ (Stop-loss ratio × Leverage).

For example: If you have 50,000 yuan, and your maximum acceptable loss is 1,000 yuan (2% of principal), and you plan to use 10x leverage, then the maximum single trade amount is 5,000 yuan. Even if you hit the stop-loss, your loss is limited to 1,000 yuan. It seems conservative, but this stability adds up over a year or two.

**Take profits in stages, don’t go all-in at once**

When you gain 20%, sell one-third of your position, then hold the remaining. When you reach 50%, sell another third. For the final position, set a simple rule, such as closing everything if the price drops below the 5-day moving average. In 2024, some traders used this logic, turning 50,000 yuan into 1 million. Not because of luck, but because of discipline.

**Use small amounts to hedge risks**

If you hold a position, buy put options with 1% of your total capital to hedge against sudden black swan events. During the unexpected crash in 2024, this move protected nearly a quarter of your capital. The cost isn’t high, but it can save your life at critical moments.

**Mathematics reveals the truth about long-term profitability**

The ultimate profit formula in trading is straightforward: (Win rate × Average profit per trade) – (Loss rate × Average loss per trade). Suppose you risk a maximum of 2% per trade and aim to exit at 20% profit; even with a win rate of only 34%, you can still make money in the long run. Many people think their win rate is too low and give up, but they don’t understand this logic.

**These four rules should be etched in your mind**

First, the maximum loss per trade should be 2% of your principal—this is the bottom line. Second, limit your trading to no more than 20 times a year; it’s better to do less than to trade recklessly. Third, your profits should be at least three times your losses to beat the annual market. Fourth, spend 70% of your time observing, and only 30% actually trading.

Many think this approach is too conservative and inefficient. But if you’ve seen enough liquidation cases, you’ll understand—staying alive and making stable profits is far more valuable than getting rich overnight.