I recently came across a very typical case and want to discuss some common pitfalls in contracts.

A friend of mine complained that he predicted the market direction correctly and held his position for four days, but ended up losing $1000 due to funding fees, and finally got liquidated. What's more frustrating is that shortly after he closed his position, the market moved in his favor—how can he not be mentally broken?

But here’s the question: Is it really just bad luck? Or are there some mechanisms he simply doesn’t understand?

**The Invisible Killer: Funding Fees**

Many people focus only on price movements when watching the market, completely forgetting about the funding fee deducted every 8 hours.

In simple terms, it’s a fee paid between long and short positions—when the rate is positive, longs pay shorts; when negative, shorts pay longs. You might have the right market direction, but being charged hundreds of dollars over two days gradually eats into your margin, and a small fluctuation can wipe you out.

What should you do? Try to avoid opening positions when funding rates are extremely high, don’t hold positions for more than 8 hours, and if possible, stand on the side that benefits from funding fee income.

**Perpetual Swap Liquidation Price Is Never the Line You Calculate**

Theoretically, with 10x leverage, a 10% drop would trigger liquidation, right? But in reality, a 5% drop might already wipe you out.

Because the platform’s calculation of the liquidation price includes fees and slippage costs, your own calculation of that line is just a theoretical value.

So don’t go all-in with full positions; using isolated margin mode can at least protect the rest of your principal. Controlling leverage between 3x and 5x is more reasonable, leaving some room for error—markets won't wait for you to react.

**High Leverage Looks Exciting, But Costs Are Scarily High**

100x leverage is indeed thrilling, but both trading fees and funding costs are based on the borrowed amount.

You might earn a few hundred dollars, only to find most of it eaten up by hidden costs at settlement. Remember: for short-term trades, high leverage is fine for quick in-and-out; for long-term holdings, keep leverage low.

Bottom line: trading contracts isn’t a guessing game of size. Getting the direction right is just the first step. Whether you can hold onto profits and avoid being wiped out by rules is what truly matters.

Exchanges design these mechanisms not to make you lose money—they’re just waiting for you to misunderstand the rules and give away your funds.

Want to survive long-term? First, understand the rules thoroughly. Calculate funding costs in advance, reserve enough margin, and keep leverage in check. When these details are handled well, you at least won’t get wiped out for no reason.