Contract trading may seem simple—predicting the rise or fall—but it can trap you deeply. The most heartbreaking part is that many people get the direction right but lose money because they don't understand the rules. Today, let's break down the most common pitfalls in contract trading.

A memorable case: a trader correctly predicted the market direction and went all-in long, thinking they had secured this wave of gains. But after holding the position for four days, they were hit with a fee of 1,000U, and in the end, they couldn't withstand the liquidation. Ironically, after closing the position, the market took off. This is a typical case of "predicting the market correctly but losing due to rules."

**Pitfall 1: The Silent Harvest of Funding Fees**

Many traders only focus on candlestick charts but completely ignore the funding fee, this invisible bloodsucker. Funding fees are settled every 8 hours, and exchanges charge them based on the positions of longs and shorts. When the rate is positive, longs pay shorts; when negative, shorts pay longs.

The problem is, you might be completely correct on the direction, but over two consecutive days, funding fees can eat away hundreds of U, eventually causing liquidation when your funds can't hold up. Even more frustrating, after closing the position, the market moves in your predicted direction. This kind of loss is the most powerless.

How to solve it? Here are some core suggestions:

First, avoid high-fee periods. When funding fees exceed 0.1% for two consecutive rounds, it's a signal that market consensus is too strong, and risk is accumulating. At this point, consider observing or trading lightly.

Second, control your holding time. Ideally, don't hold positions longer than 8 hours, which can effectively avoid the erosion from multiple funding fee cycles.

Third, if your market judgment is clear enough, consider taking the opposite side of high funding rates. When the market is extremely bullish (high rates), shorting against the trend not only profits from the market movement but also earns funding fees. This is a smart strategy.

**Pitfall 2: The Trap of Liquidation Price Calculation**

A common mistake among beginners is simple arithmetic: a 10x leverage drops 10% and you get liquidated, so using 10x leverage is safe. But what happens? A 5% drop gets you liquidated, and your account is wiped out.

Where's the root cause? When the exchange liquidates, it adds a liquidation fee, which makes your liquidation price closer than you think. In other words, your safety margin is much tighter than what you calculate with a calculator.

Solutions:

First, abandon full-position thinking. Use isolated margin mode instead of cross margin, so that even if one position is liquidated, it won't affect other positions, protecting your overall funds.

Second, keep leverage within 3–5x. This range offers enough leverage effect without excessively amplifying risk, providing a balanced approach.

Third, proactively maintain sufficient margin. Adequate margin not only automatically increases the distance to liquidation but also gives you more psychological space to handle market volatility.

**Pitfall 3: The Hidden Costs of High Leverage**

100x leverage sounds exciting, but in practice, you'll find the costs staggering. Fees and funding rates are calculated based on the actual "borrowed" amount, not your principal.

What does this mean? You might predict the market correctly and earn hundreds of U, but when settling, the sum of fees and funding costs can wipe out your profit, resulting in a loss. This is the true face of high leverage.

Remember this golden rule: high leverage for short-term quick trades, low leverage for long-term holds. High leverage is only suitable for short cycles with quick in and out; for long-term positions, reduce leverage. The higher the leverage, the exponentially higher the risk—don't be blinded by the allure of amplified gains.

**Core Cognitive Shift**

Many people's failures are not due to incorrect judgment but a lack of thorough understanding of the rules. Exchanges are not afraid of you losing money; they fear you understanding their mechanism design. To survive and profit in the contract market, the key is not just to bet on the right direction but to understand the rules deeply and make them work for you.

Next time before trading contracts, ask yourself: Have I truly understood how funding fees work? How is the liquidation line calculated? Can I afford the costs of this leverage? Think it through carefully before entering.