Contract trading may seem simple—bet on the right direction to make money. But in reality, many people correctly judge the market direction, yet still end up losing everything. The root cause is not the candlestick chart movement, but a misunderstanding of trading rules.

A trader once experienced this: correctly predicted the market, held on for four days, paid over 1000U in funding fees, and finally got liquidated, only for the market to surge the next day. This is not a market problem; it’s a failure to fully understand the rule design.

**Funding Fees: The Invisible Harvesting Machine**

Most people focus only on the candlestick chart when trading contracts, completely ignoring the funding fee, an invisible killer. Funding fees are settled every 8 hours, charged unilaterally based on the position direction—if the rate is positive, longs pay shorts; if negative, the opposite.

A common scenario is: going long with full leverage is correct, but repeatedly gets cut by funding fees for hundreds of dollars, eventually leading to margin calls and liquidation. Ironically, two days after liquidation, the anticipated rally actually occurs.

The key to avoiding traps is straightforward: avoid periods where the funding rate exceeds 0.1% for two consecutive rounds, keep your position duration within 8 hours, and if your judgment is clear, choose the side with the favorable reverse funding rate.

**The Pitfall in Liquidation Price Calculation**

Beginners often make a mistake: using 10x leverage, thinking a 10% drop will cause liquidation, but in reality, they get liquidated after only a 5% drop. Why? Because the platform’s liquidation fee is included in the liquidation price calculation, making the actual liquidation point closer to the cost price.

The solution is to use isolated margin mode instead of cross margin, keep leverage within a safe range of 3–5x, and proactively maintain more margin buffers. This automatically extends the distance to liquidation.

**The Hidden Cost of High Leverage**

100x leverage sounds exciting but is actually a trap. Fees and funding costs are calculated based on the total borrowed amount, not the actual risk. Even if your prediction is correct and you make a few hundred dollars, these costs can wipe out your profits or even cause losses at settlement.

Remember this rule: use high leverage for short-term trading, and low leverage for holding positions. The higher the leverage, the more terrifying the hidden costs. Don’t be blinded by short-term excitement.

Ultimately, the secret to thriving in the crypto world is not to bet on the correct market direction, but to thoroughly understand the trading rules. Only by understanding the platform’s mechanism design can you avoid the pitfalls paved with real money.