Looking in the Right Direction Still Gets Liquidated: The Truth About the "Contract Hunting" in the Crypto Market

In contract trading, many traders encounter the same paradox: correctly predicting the trend but still having their account wiped out. This is not due to the market being “malicious”, but because the operational mechanisms of derivative contracts contain rules powerful enough to crush any advantage if not fully understood.

1. The Hidden Traps in the Contract Mechanism In a strong upward trend, prices may go as predicted, but just a quick wick of a candle for a few milliseconds can put many positions into liquidation. The factors causing this include: • Funding rate increases significantly When the buying crowd is too large, the funding rate can increase to 0.2%/8h. With continuous repetition, this cost silently erodes profits and weakens positions over time. • Stop-loss hunting (liquidity hunting) In areas with a high concentration of SL orders, the market often experiences extremely rapid candle wicks. When the price hits the SL clusters, the system will trigger liquidation at the latest price, causing a series of positions to be closed simultaneously. • Ladder liquidation ( liquidation according to the ladder ) When the price hits the liquidation level, the exchange will close the position with a market order. This creates significant slippage, causing the actual amount lost to far exceed expectations, pushing the account into a state of complete liquidation.
2. Common Characteristics of Profitable Traders In the contract, winning is not due to correctly guessing the price, but rather due to risk management and trading discipline. • Don't predict, but calculate probabilities The first question is not “where is the price going?” but rather “how much can I lose at most?” Only when the acceptable level of risk is established should one consider opening a position. • No FOMO, always control your position Leverage above 5x turns players into “fee-earning subjects” for the exchange. Leverage from 1–3x combined with isolated mode helps limit the spread of risks and maintain a longer survival rate. • Do not enter orders based on small candles The 1–5 minute frame generates noise signals and can easily lead to impulsive trading. Stable traders only open positions when the 4H frame structure is clear, with a confirmed breakout, and set the SL behind the structural area.
3. The Code of Conduct Required When Trading Contracts To exist in the long run, any strategy must adhere to the framework: • Determine “the death” before entering the order – Where is the stop-loss price? – What is the entry rate? – What is the maximum loss? If the three factors are not clearly defined, do not open a position. • Take profit periodically to lock in gains Every time the profit reaches 10%, you can take 30% and transfer it to a cold wallet to turn open profits into real profits, avoiding the case where the market suddenly reverses. • Limit the losing streak After two consecutive losing trades, pause trading and review your strategy. Stopping at the right moment is more important than trying to “recover.” Conclusion In crypto contract trading, understanding the market mechanism is more important than accurately guessing the price direction. Those who endure are not necessarily the best analysts, but rather the best risk managers who know how to steer clear of the invisible traps created by the very rules of the contract.