Testnet

Why perps are risky

Leverage, speed and emotion: the ways most perp traders lose, and how knowing them helps.

6 minLesson 6 of 62 questions at the end

Key ideas

  1. 1Leverage turns ordinary price moves into large swings in your account. Crypto can move 5% in an hour.
  2. 2Liquidation is final: the margin is gone, even if the price comes back a minute later.
  3. 3Losses are harder to recover than they feel: after losing 50%, you need +100% to get back.
  4. 4Knowing your liquidation price, sizing by risk and always having a stop loss are what keep one bad trade from ending your account.

How traders lose

  • Too much leverage. Crypto can move 5% in an hour. At 20x, that is the whole margin.
  • No stop loss. A loss that could have been small keeps growing until liquidation.
  • Too big a share of the account on one trade. A few bad trades in a row, which happen to everyone, empty it.
  • Trading on feelings. Chasing a move, doubling after a loss, moving a stop. Psychology

Losses are harder to undo than they look

Getting back from a loss

The deeper the loss, the bigger the gain needed just to get back to where you started.

You lose50%
Lost
−50%
Needed back
+100%

After losing 50%, what is left has to grow 100% just to get back to the start.

After 10 losing trades in a row
90%1% a trade
82%2% a trade
60%5% a trade
35%10% a trade
6%25% a trade

Ten losses in a row happen to almost every trader at some point. At 1% a trade you keep about 90% of the account; at 25% a trade, about 6%.

Speed

Perps trade around the clock, and prices can gap through levels in seconds during news or when many positions are liquidated at once. A stop loss fills as a market order once triggered, so in a fast move it can fill worse than its price. Liquidation doesn’t wait for you to wake up.

What knowing this changes

  1. 1Decide the loss before the trade: risk a small share of the account, often 0.5% to 2%. Risk management
  2. 2Always set a stop loss, and size the position from it. Size by risk
  3. 3Prefer low leverage, and know your liquidation price.
  4. 4Set limits on yourself on a calm day. Your limits

Common mistakes

  • Risking a big share of your account on one trade. A run of losses happens to everyone.
  • Trading money you need for rent, bills or anything else.
  • Turning off stop losses because they “keep getting hit”. Stops being hit is how small losses stay small.
  • Revenge trading after a loss: bigger size, higher leverage, no plan.

Check yourself

Question 1 of 2

You lose 50% of your account. What gain gets you back to where you started?

Try it in Lance

Switch the order panel to size by risk: say what you can lose, set a stop, and Lance works out the size.

Size a trade by risk
Next partPart 3: Placing tradesMarket and limit ordersFill now at the prices on the book, or name your price and wait for it.Next lesson
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Lance Learn is education, not advice. Examples use made-up or rounded numbers and say so; nothing here tells you what to trade.

Trading perpetual futures with leverage is high risk. Prices can move fast and you can lose all the money you put in. Lance is software: it does not give investment advice, manage money or trade on anyone’s behalf. Trades are executed on Hyperliquid, a third-party exchange that is not affiliated with Lance. Lance is not available to persons in the United States, the United Kingdom and sanctioned countries.