Recently blocked an order signal account, and that guy told his followers to go 20x long on BTC with full position. When the funding rate turned positive that night, he started to harvest. Seeing a screen full of liquidation screenshots, I was reminded of the stumbles I made in my early years.

To be honest, the perpetual contract tool has been played to death. Too many treat it as a casino, but they don’t understand its core logic. I’ve also tried 50x leverage myself; when I got liquidated, my account was down to two digits. That feeling is really unpleasant. Now I can stay steady only because I’ve walked through all the pitfalls and summarized that clumsy method.

Perpetual contracts themselves are not the problem. They allow you to go long or short based on price movements without actually holding the assets, which is quite clever. But even the best tools depend on who uses them. The key lies in three mechanisms: unlimited holding periods, funding rates, and the mark price. If you don’t understand these, you’ll get liquidated sooner or later.

**Funding Rate is the Market’s Barometer**

Understanding it thoroughly is essential; don’t wait until liquidation to ask why. The funding rate is essentially the market’s automatic balancer. When the contract price deviates too far from the spot price, this mechanism kicks in.

What does a positive rate mean? Longs pay shorts. The market is too hot, too many longs, and they have to pay a price. Conversely, a negative rate means shorts pay longs—the market is too cold, and short sellers are penalized. I’ve been burned by this before. Once, I held a position overnight without checking the rate, and the next day I saw most of my profit eaten away. That’s when I realized how fierce this thing can be. My current rule is simple: open a position only when the rate is close to zero; avoid trading during high-rate periods.

**The Mark Price is the Key to Survival**

Many people judge liquidation based on the transaction price, but that’s a big mistake. The mark price is calculated as a weighted average of the spot prices from multiple exchanges, used to determine whether you get liquidated. This design prevents price manipulation on a single platform. When market volatility is high, this becomes especially important, helping you avoid many false alarms of liquidation.

Perpetual contracts are just like that—understand the mechanisms, and they’re not a casino, but a tool.