How to Trade Futures? Read This Before You Get Liquidated

Hello, this is Bitpunk. Today I want to have a serious talk about how to trade futures. I've both lost and made tens of millions of won with Bitcoin, and this post is an honest write-up based on that experience, so I especially recommend that beginners read it.

Let me start with a question. Is futures trading really just picking either long or short and betting on it? Why do most traders come in hoping to make money and leave having experienced nothing but big losses?

Why Most Traders Fail

You've probably seen YouTubers or influencers who recommend futures trading or claim you can make big money if you just do things their way. In reality, though, only a tiny handful of people actually make big money from futures trading. There's even a saying that not trading futures is how you make money.

The success rate in futures trading doesn't even reach double digits. Looking around me, maybe one in a hundred people has succeeded, if that, and most have failed. The reason is that they only think about making money and have no risk management strategy at all for how they'll act when losses occur.

Averaging Down and HODLing, but Never a Stop Loss

For example, when the market moves in the same direction as their position, people usually have a "plan" that isn't really a plan: HODL, take profit at the top, or pyramid into the position. On the other hand, when the market moves against their position, they often have no plan other than averaging down, HODLing, and waiting for a rescue rally.

To be precise, the first case is greed, and the second is acting on emotion out of a "maybe it'll turn around" hope. Put in technical terms, the second case is the greed and wishful thinking of averaging down and HODLing while never cutting losses, even when losses are piling up.

When you're in profit, acting without a strategy might be fine, but when you're losing, you need an active response strategy to minimize the damage. In other words, you need a plan for where you'll set your stop loss, or whether you'll average down, if the market moves differently from what you expected. Otherwise, you could get liquidated or take a big hit to your seed capital.

Long or Short: Is It Really One or the Other?

Before we talk about trading strategy, let me bring up one more thing. Is futures trading, like Bitcoin futures, a game where you make money just by picking one of two positions, long or short? You might think so. In fact, some people do think that way and make money. And once some time has passed and you only look at the direction, it's very easy to say, "See, I told you it'd go long/short!"

But if you trade over a longer period or review past charts, you'll see it. In reality, countless swings and variables come up along the way. Depending on the leverage you use, this can lead to forced liquidation or big losses.

Trading is not gambling where you bet on one of two options, long or short! Of course, since prices either go up or down, you might make money once or twice even if you join in with the mindset of buying an odd-or-even lottery ticket. But in the end, this approach is bound to fail. Think about it. Even with a coin, it can land heads ten or more times in a row at some point. Even if you guessed right nine times, one miss could cost you everything. That is, if you trade this way.

Let's think about it. If something will eventually make you lose all your money, or carries a high risk of doing so, wouldn't it be better to prepare a better strategy from the start? That's exactly why it's important to take trading seriously, manage the risk that comes with entering a position, and generate consistent profits. To do that, you need your own trading strategy and the right attitude.

Understanding Trading Strategy

By now, I think you'll agree on why a trading strategy is necessary. A trading strategy really shines when something unexpected happens or is about to happen. In other words, when we're swept up in extreme fear or anxiety and can't think straight, we can respond mechanically by following our trading strategy.

The key to building a trading strategy is limiting losses. In other words, managing the risks that may arise.

We manage risk in everyday life. Would anyone jaywalk across a highway with no crosswalk? Yet in trading, people try to catch falling knives and, out of greed, buy assets at the very end of an upward wave. Why do they act so recklessly?

Because they have no clear goal and no strategy to reach it. Here, the goal is usually reaching the seed capital you want, and the strategy is the set of responses to get there. If you've set a goal of turning KRW 1,000,000 into KRW 10,000,000, you need to set principles such as appropriate take-profit and stop-loss levels. The simplest yet most useful thing you can do is use orders like stop loss and take profit, which are offered by default on Binance and other futures exchanges.

Binance Cooling-Off and Responsible Trading

I regularly use Binance for Bitcoin futures trading. As you may know from my previous post, I once took a big stop loss. Afterward, I tried to take a break from trading, but it wasn't easy to stop on my own. Around that time, Binance launched a feature called Cooling-Off.

Binance Cooling-Off is a system that lets traders pause trading and take a break. From the exchange's point of view, it makes money when traders trade a lot, but for me as a user, it was a really useful feature. The reason I keep using Binance and like it is precisely that it has features like this, made purely for its users.

Recently, Binance Futures also launched a Responsible Trading campaign. To sum up the long page briefly, it says you should take trading seriously and follow a few principles. If you've just started Bitcoin futures trading, I strongly recommend checking out the campaign page.

• Don't trade with more money than you can afford to lose
• Keep learning and studying (use Binance Academy and Research)
• Know when to stop and build self-control (set up Cooling-Off, keep a trading journal, etc.)

Closing Thoughts

When someone shows off huge futures trading profits, people tend to focus only on the profit itself. Then they think that with enough seed money, they could make money like that too. But fundamentally, how much money you can make is often proportional to how much risk you took on. Especially in futures trading.

If you want to succeed at trading, please take it truly seriously. Enter positions as carefully as you would when spending KRW 3,000,000 or KRW 30,000,000 in real life. If you're not confident, practice somewhere like the Binance Testnet, or keep studying and practicing with resources such as Binance Academy articles.

There are always opportunities in the market. Don't be anxious; build up your own trading skills. When trading isn't going well, stopping might be the answer. Sadly, you might not be suited for trading at all. In that case, it's best to accept that fact and stop trading. If you can't make money from something and only lose money doing it, not doing it actually protects your money and is better for you in the long run.

Opportunities to make money always come with risk, and if you can't manage that risk, you won't be able to make money consistently in the end. In futures trading, never forget the risk that you can always lose all your funds, and approach trading with care.

'Never trade in situations where you don't have control. That's gambling, not trading.' - Paul Tudor Jones

Thank you so much for reading this long post.