A seasoned trader with 5 years in the industry has a profound insight — every day, they see newcomers entering the market full of hope, only to be wiped out during the first major wave of volatility. This is not a matter of luck, but fundamentally due to not understanding the rules before stepping in.

Many people oversimplify contract trading. They put in a few thousand yuan and expect to make tens of thousands, using the most aggressive leverage to take the largest positions. This approach sounds exciting, but often results in the account being wiped out overnight. Those who truly survive in the market are not the ones who know how to make money first, but the ones who know how not to die.

**Understand these concepts before you get in**

Contract trading does have rules, but it’s not a game of guessing size. You don’t need to be an encyclopedia of terms, but these core principles must be in your mind:

Leverage is a double-edged sword. 20x leverage sounds tempting, but think from another angle — a 1% market move means your principal fluctuates by 20%. High returns and high risks are inseparable. Many people die here, thinking they can control leverage, only to be crushed by a sudden reverse move.

Long and short positions change the game. When the market rises, you can buy long to profit; when it falls, you can short to profit as well. This means more opportunities, but also more chances to make mistakes. The greedier your mindset, the faster you’ll die.

Margin and liquidation are the life and death lines of contract trading. Margin is the "bet" you freeze when opening a position. When the market moves against you and losses grow, approaching the margin level, the system will automatically close your position (liquidation), and your principal can vanish in an instant. This is not hypothetical — it happens every day.

Perpetual contracts also have an invisible cost: funding rate. Settled every 8 hours, long-term holders pay this fee. It may seem small, but over time it can eat into a significant portion of your profits.

**How to survive with 1000U — capital management rules**

Suppose you have 1000U in your account. The scientifically sound approach is:

**Rule 1: Diversify your positions, never go all-in**

Divide 1000U into 10 parts, each 100U. Only use one part at a time to enter the market. What’s the benefit? A single misjudgment can lose at most 10% of your principal, and your account remains alive. If you put all your money in at once, one mistake means game over.

Some might say this is too conservative. But the question is — what’s your goal? To get rich overnight or to survive in the market? Many people confuse the two.

**Rule 2: Keep leverage within limits**

For a beginner with 1000U, it’s recommended not to exceed 5x leverage. Some may disagree, thinking that’s too cautious. But do the math: 5x leverage, a 10% price move means a 50% fluctuation in your principal. That’s already quite risky. Higher leverage for a beginner is basically inviting trouble.

Experienced traders might dare to use 10x or 15x leverage, but that’s based on years of practical experience and mental preparation. Beginners who imitate their style are likely to pay tuition.

**Rule 3: Set stop-loss and take-profit in advance**

Many lose money simply because they don’t set stop-loss orders. When the price moves against them, they instinctively refuse to admit defeat and add to their position, hoping to turn it around. The result is deeper losses.

Professional traders set their stop-loss points when opening a position. Limit losses to within 2% of your principal. It sounds small, but if you stick to this discipline, even if 70 out of 100 trades fail, the remaining profitable trades will keep you alive.

Take-profit is equally important. Many people get greedy when they’re making money, waiting to see if they can earn more, only to see the trend reverse and profits wiped out. The proper approach is to take profits in stages — when reaching half of your target gain, close 30% of your position to lock in profits. Let the rest run, but with much less psychological pressure.

**Rule 4: Always reserve startup capital**

Suppose you have 1000U, don’t invest all of it in trading. Keep 30% (300U) as emergency funds. When a big opportunity arises, you have bullets to add to your position; when facing a drawdown, you have funds to buy the dip. Many accounts go to zero simply because they run out of money — no matter how good the opportunity, they can’t take advantage.

The essence of contract trading is risk management. Many people have the ability to make money, but few can survive long-term. From day one, develop good habits — diversify risk, control leverage, strictly set stop-losses, and keep reserve funds — only then can you survive the market’s long-term fluctuations.