Watching Tesla (TSLA) jump up and down recently, many brothers who are used to trading cryptocurrency contracts are getting itchy and feel that Bitcoin's volatility is too small, wanting to rush into Tesla's derivative contracts.
Don't rush to leverage 50 times; using the mindset from the cryptocurrency world to trade contracts mapped to US stocks is fundamentally two different logics. If you don't want to be carried away, first understand these three points.
1. The deadliest killer: Gap
You are used to trading Bitcoin 24 hours continuously, thinking you can always stop loss at any time?
Don't be naive. US stocks have a 'closing time.'
Tesla's closing price tonight is $400. If Musk tweets in the middle of the night, the pre-market tomorrow may open up or down by 10%.
In the cryptocurrency world, you still have the opportunity to operate; in the US stock market contracts, when encountering such a gap, your stop-loss order cannot be triggered at all, and it directly leads to liquidation.
Think about it, when you are sleeping everything is fine, and when you wake up your position is gone, and you still owe money to the exchange. Can you handle this feeling?
2. The funding rate can drain your blood.
The contracts in the cryptocurrency world have a funding rate.
When the entire market is blindly going long on Tesla, this rate will be absurdly high.
Tesla's stock price may not have risen much yet, but the interest you pay to the shorts every day can wipe out your principal.
This is called 'dull knife cutting meat'. Unless it's a one-sided bullish market, otherwise that kind of upward fluctuating trend won't yield enough profit to cover the funding rate.
3. Musk is the biggest 'black swan'.
When trading bitcoin, you focus on the K-line and the macro.
When trading Tesla, you focus on Musk's mood.
This man can halve or double the stock price with a single tweet. Holding dozens of times leverage means you are betting against an emotionally unstable 'madman'.
Technical analysis is a joke in front of him.