Brother Magi has an 80% win rate but lost 1.46 million USD! A bloody lesson in Margin Trading.

On December 21, on-chain data monitoring showed that “Brother Maji” Huang Licheng closed all of his Bitcoin long orders and HYPE long orders. So far, Brother Maji has made 15 trades in a single week, all of which were go long, with 12 profitable trades and 3 losing trades, achieving an 80% win rate. However, the overall position has a net loss of about 1.46 million dollars for the week. Brother Maji also added a 10x ZEC long order worth 390,000 dollars, with an entry price of 439.24 dollars.

The Harsh Truth of Why an 80% Win Rate Still Leads to a Loss of 1.46 Million USD

(Source: Hypurrscan)

On December 21, news has it that according to on-chain data monitoring, “Brother Maji” Huang Licheng has closed all his Bitcoin long orders and HYPE long orders.

The trading record of Brother Maji for the week provides a textbook-level example of risk management failure. All 15 trades were long orders, with 12 profitable and 3 losing trades, resulting in an impressive win rate of 80%. However, the final net loss was 1.46 million dollars. The core of this contradiction lies in the fact that the scale of the 3 losing trades was much larger than that of the 12 profitable trades, causing a few large losses to devour the profits from multiple small wins.

This phenomenon is very common in high leverage trading and is referred to as “making small profits and losing big money.” When traders use high leverage, small price fluctuations can generate substantial profits, which reinforces the illusion that “making money is easy.” However, once the directional judgment is incorrect, the same high leverage can magnify losses to catastrophic levels. If Brother Majis has 12 profitable trades averaging a profit of $200,000 each, the total profit is $2.4 million; but if there are 3 losing trades averaging a loss of $1.29 million each, the total loss is $3.87 million, resulting in a net loss of $1.47 million (close to the actual $1.46 million).

Three Deadly Traps of High Leverage Trading

Position Management Out of Control: High win rate but single trade loss too large, 3 big losses wipe out all profits from 12 small wins.

Leverage Amplifies Risk: 25x leverage means that a 4% reverse fluctuation will liquidate the position, leaving very little room for stop-loss.

Psychological Anchoring Effect: Excessive confidence after consecutive profits leads to increasing position size to bet on the next trade, resulting in encountering a black swan event.

Brother Ma Ji chose to close all positions in Bitcoin and go long on HYPE, possibly realizing that the market structure has changed. Although Bitcoin briefly broke through $90,000 this week, it quickly fell back to $88,793, showing that the $90,000 resistance level is extremely strong. HYPE continues to be weak under the pressure of competitors Aster, Lighter, and edgeX vying for market share through point activities. Timely stop-loss and strategy adjustment are the hallmarks of mature traders, but the tuition fee of $1,460,000 has already been paid.

25x ETH long order cliff edge dance

Brother Ma Ji currently holds a 25x leveraged long order on Ethereum, with a position of 5400 ETH and a liquidation price of approximately 2795 USD. Based on the current ETH price of about 3000 USD, there is only about a 7% buffer space until the liquidation price. This means that if Ethereum drops by 7%, the entire position will be forcibly closed, and the margin of 5400 ETH (approximately 16.2 million USD) will be wiped out.

A leverage of 25 times is an extremely aggressive configuration. In traditional financial markets, leverage is usually controlled at 2-5 times, and professional traders rarely exceed 10 times. A 25 times leverage means that a mere 4% reverse fluctuation can lead to liquidation. Ethereum, being a cryptocurrency with volatility far exceeding that of traditional assets, often experiences daily fluctuations of 7%. Brother Majie is essentially dancing on the edge of a cliff, and with the slightest misstep, he could fall into the abyss.

According to the latest data from Lookonchain, Brother Ma Ji has also added a 10x ZEC long order, with a position value of approximately $390,000 and an entry price of $439.24. ZEC (Zcash) is a privacy coin that has been performing strongly recently due to increased demand for privacy. A 10x leverage is relatively conservative compared to a 25x ETH long order, but it is still highly risky. If ZEC retraces 10% from $439, this $390,000 position will be liquidated.

The multi-coin, high-leverage strategy of Brother Ma Ji shows that he adopts a “diversified betting” model. Instead of putting all funds into a single coin, he simultaneously holds long orders for both ETH and ZEC, allowing potential gains from one to offset losses from the other in case of a surge. However, the premise of this strategy is accurate directional judgment. If the overall market turns bearish, all long orders may incur losses at the same time, and diversification may instead amplify the total risk exposure.

Currently, the most dangerous is the ETH long order. Ethereum has recently performed worse than Bitcoin, with the number of active addresses dropping to a 2023 low, ETF continuous outflows, and renewed selling pressure in the United States. On the technical side, ETH is struggling at the support level of 2850 USD; if it breaks below, it may accelerate down to the 2400-2600 USD range. Moreover, the liquidation price of the big brother is 2795 USD, which is exactly on this downward path, posing extremely high risks.

The Iron Law of Win Rate Traps and Capital Management

The case of Brother Magi having an 80% win rate this week yet losing a net of 1.46 million dollars perfectly illustrates the “win rate trap” in trading. Many novice traders mistakenly believe that increasing the win rate is the key to profitability, but professional traders know that profitability = win rate × average profit - loss rate × average loss. When the average loss far exceeds the average profit, one can still lose money even with a high win rate.

This is why professional traders emphasize “cut losses short and let profits run.” Set strict stop-losses for each trade, decisively exit when losing, keeping a single loss within 1-2% of total capital. When profitable, let the profits run without rushing to take profits. This strategy may lead to a win rate of 40-50%, but as long as the average profit is more than three times the average loss, the overall result can still be profitable.

The problem with Brother Maji may be the opposite: when making a profit, he is eager to cash out, closing positions after making 10-20% on each trade; when incurring losses, he holds onto hope, expecting a rebound and unwilling to cut losses, resulting in losses expanding to 50-100%. This mode of “making small profits and losing big money” is the main reason for retail investors' losses.

High leverage only adds fuel to the fire. A 25x leverage means that only 4% of the principal is needed to enter a position of 100%, amplifying profits by 25 times, but also amplifying losses by 25 times. Even more critically, high leverage severely compresses the stop-loss space. If using 2x leverage, one can withstand a 50% reverse fluctuation; but with 25x leverage, only a 4% reverse fluctuation can be tolerated. This extremely narrow margin for error means that even if the directional judgment is correct, one may still be forced to close positions due to short-term fluctuations.

For ordinary investors, the case of Brother Maji provides valuable lessons. First, win rate is not the deciding factor for profit; fund management is. Second, high leverage is a double-edged sword, and beginners should avoid exceeding 3x leverage. Third, timely stop-loss is more important than holding onto fantasies; leaving the market with a 10% loss is always better than being forced to liquidate with a 50% loss. Fourth, even seasoned players like Brother Maji can make mistakes and incur losses in front of the market; no one can earn without loss.