Get Liquidated in contracts? The iron rules of risk control from a ten-year trader!

The market is never short of opportunities; what is lacking is the people who can survive long enough to wait for those opportunities. After ten years in the industry, I have seen countless Get Liquidated cases, and the core conclusion is only one: all Get Liquidated cases are the inevitable result of human risk control failure, not a coincidence of the market. Below is a risk control system verified through thousands of trades; understanding it can help avoid 90% of Get Liquidated traps.

1. Leverage Awareness Correction: The core of risk is the position rather than the multiple.

1. Derivation of Core Formulas

The market's fear of leverage stems from cognitive bias, and the real risk is determined by the leverage multiplier × position ratio, as shown in the following formula:​

Single currency risk exposure = Leverage ratio * Position ratio

Example 1: 100x leverage + 1% position → Risk exposure = 100 * 1% = 1 (equivalent to the risk exposure of 100% position in spot trading)

Example 2: 10x leverage + 5% position → Risk exposure = 10 * 5% = 0.5 (only 50% of the full risk of spot trading)

Leverage is a tool, not poison; the line between life and death is always in position control. Professional traders use 100x leverage to achieve low-risk arbitrage, while retail investors get liquidated with 10x leverage; the difference lies in position management.

2. The essence of stop-loss: the risk firewall of the account

1. Iron Rule Standard

The loss from a single trade must not exceed 2% of the principal, which is the core premise for ten years without getting liquidated. The reasoning is as follows: even if there are five consecutive stop losses, the account will still have 90.3% of the principal remaining (0.98^5≈0.903), preserving the chance to recover; however, if a single loss is 5%, after five stop losses, the principal will only remain at 77.3%, drastically reducing the margin for error.

2. Key Points

Stop loss is not about passively accepting losses, but actively defining risk: before opening a position, a stop loss level must be set (such as breaking through key support levels or reaching a fixed loss percentage), and the stop loss order should be placed simultaneously to avoid emotional hesitation.

3. The correct posture for rolling positions: Use profits to amplify the safety margin.

1. Core Difference

Error in gambling: using principal to increase positions, directly eroding initial capital when losing, with risks amplifying geometrically.

Correct Rolling: Only use the profits to increase positions. Even if the new position incurs losses, it does not affect the safety of the principal, which is equivalent to gambling with the market's money.

2. Practical Case Studies

1. The first position has a profit of 10% (earning 500 yuan), at this time, you can use the profit of 500 yuan to increase the position by 10% (new position 500 yuan)

2. The total position changes to 5500 yuan (principal 5000 yuan + profit 500 yuan), and the principal has never been used.

3. Margin of safety increased by 30%: If the new position incurs a loss of 10%, the loss will only be 50 yuan (accounting for 0.1% of the principal), which is far below the 2% red line.

4. Institutional Level Position Calculation Formula: Precisely Control Risk Boundaries

1. Formula Principle

Based on a single stop-loss of ≤2% of the principal, ensuring that the risk bottom line is not breached under any circumstances:

Maximum opening position for a single currency = ( principal × 2%) ÷ ( stop-loss margin × leverage multiplier).

Parameter description:

Stop Loss Range: The fluctuation ratio from the opening price to the stop loss price (for example, if planning to bear a 2% fluctuation stop loss, then the stop loss range = 2%)

Leverage: Selected contract leverage (e.g., 10x, 20x)

2. Case Analysis

Taking a principal of 50,000, a stop-loss red line of 2%, a leverage of 10 times, and a stop-loss margin of 2% as an example:

1. Calculate the numerator: 50000×2%=1000 yuan (maximum loss per transaction)

2. Calculate the denominator: 2% (stop-loss margin) × 10 (leverage) = 0.2

3. Maximum position: 1000 ÷ 0.2 = 5000 yuan (10% of the principal)

Under this parameter, the maximum position that can be opened is 5000 yuan. When the fluctuation is 2%, the loss will be exactly 1000 yuan, strictly maintaining the 2% red line.

Five, three-step profit-taking strategy: lock in profits + retain trend gains

The core of taking profit is to secure gains while not missing out on the trend, executed in three phases:

1. First Take Profit Level (20% Profit): Close 1/3 of the position to lock in the basic profit (for example, if a 5000 yuan position makes a 20% profit earning 1000 yuan, closing 1/3 will secure 333 yuan, reducing the cost of the remaining position).

2. Second profit-taking level (50% profit): Rebalance 1/3 of the position, at this point, a profit of 666 yuan has been locked in, and the remaining position will not incur any loss of principal even if it retraces.

3. Third Stage (Trailing Stop Loss): Place a trailing stop loss for the remaining 1/3 position at the 5-day moving average - the short-term trend is supported by the 5-day moving average; exit if it falls below the 5-day moving average, and use trend following to protect the remaining profits.

6. Core Trading Logic: Replace Emotional Decisions with Mathematical Discipline

1. Expectation Value Formula Trading Mathematical Engine

The essence of trading profit is positive expected value, as shown in the following formula:

Expected Value = (Win Rate × Average Profit Margin) - (Loss Rate × Average Loss Margin)

Key verification: If a stop loss of 2% and a take profit of 20% are strictly executed, even with a win rate of only 34%, the expected value is still positive.

Expected Value = (34% × 20% ) - (66% × 2% ) = 6.8% - 1.32% = 5.48%

→Each trade expects a profit of 5.48%, and long-term compounding can achieve high returns (the core logic of professional players is an annualized 400%)

2. Discipline is prioritized over technology

Technical analysis determines the timing for opening a position, but discipline determines whether one can make money: 90% of retail investors lose not because of poor skills, but because they violate discipline (such as not setting stop-losses, over-leveraging, and frequent trading).

Ultimate Risk Control Rule

1. Single Transaction Risk Bottom Line: Single Loss ≤ 2% of Principal (Lifeline, cannot be exceeded)

2. Transaction Frequency Control: Annual transactions ≤ 20 (high-quality opportunities no more than 2 times per month, avoid frequent trial and error)

3. Profit and Loss Ratio Requirement: Each trade must have a profit and loss ratio of ≥3:1 (earn 3 yuan to take on 1 yuan of risk, ensuring long-term positive returns)

4. Empty Position Waiting Principle: 70% of the time in an empty position (the market is in a sideways trend 80% of the time, and there are trend opportunities only 20% of the time; patience is more important than technique)

Contracts are not about gambling on size, but about using risk control to earn certain profits. If you can adhere to the above discipline, you have already surpassed 95% of people.