# Perpetual Contracts: Avoid These 3 Pitfalls or Your Account Will Be Ruined

Many traders stumble in perpetual contracts. It may seem trivial, but there are reasons behind it. They accurately judge the market direction but end up losing and being forced out — the problem often isn't market prediction but a lack of understanding of the contract mechanism.

Recently, someone reported that their position remained unchanged for several days, with the funding fee alone exceeding 1000U, yet they still couldn't escape liquidation. After closing the position, the market moved in the expected direction. This is a typical tragedy caused by focusing on the outcome rather than understanding the rules.

The most damaging risk factors in perpetual contract trading are the following three:

## 1. Funding Rate: Invisible Erosion of Margin

Holding a position isn't without cost. The system settles funding fees every 8 hours: when the rate is positive, longs pay; when negative, shorts bear the cost. Many choose to hold full positions, seemingly with sufficient margin, but are continuously eroded by funding fees, eventually reaching the liquidation threshold.

Strategy: Avoid long-term holding when funding rates are high; do not let positions span multiple settlement periods; prioritize entering positions in the direction that earns funding fees.

## 2. Liquidation Line: Easier to Hit Than You Think

Traders calculate the theoretical liquidation price, but the exchange's settlement includes fees and liquidation premiums. The result is often that the price drops just a little, and the position is already liquidated.

Defense tips: Never operate with full margin; use isolated margin mode to contain risk; keep leverage between 3-5x, leaving sufficient buffer for margin.

## 3. High Leverage: Amplifies Risks

The higher the leverage, the more the trading fees and funding costs grow exponentially. Many people get the market direction right but cannot profit due to costs eroding their gains.

Essentially, success or failure in perpetual contracts isn't just about predicting price movements but mastering the mechanism. Familiarity with the rules and avoiding traps are key to survival in this market; only by surviving can one talk about profits and growth.