Can you really play in the cryptocurrency world? Can you trade contracts?
Many newcomers are very interested in contracts, but they don't understand the rules or risk management, and they are quickly educated by the market.
Today, I will explain clearly what contracts are, how to play, and how to avoid liquidation in the most practical way.
1. What is contract trading?
In one sentence:
You don't need to actually hold the coins; as long as your directional judgment is correct, you can make money; if the direction is wrong, you will lose.
• You think it will rise → Go long
• You think it will fall → Go short
The core is to capitalize on price fluctuations, not to hold assets.
2. Two common types of contracts
1. Perpetual contract
No expiration date, can be held indefinitely.
Price is anchored to the spot market through the “funding rate,” with longs and shorts paying each other.
2. Futures contract
Has a fixed expiration date, settled at the spot price upon expiration (or physical delivery).
Common ones include current quarter and next quarter contracts.
3. The most important basic concepts
1. Contract size
The smallest trading unit of a contract. Each contract has a different value for different coin pairs.
2. Leverage
Amplifies profits and also amplifies losses.
10x leverage means: if you drop 10%, you could be liquidated directly.
3. Opening a position
• Buy to go long: bullish
• Sell to go short: bearish
4. Closing a position
Ending a trade to lock in profits or losses, can be market price or limit price.
5. Forced liquidation
If the margin is insufficient, the system will automatically liquidate your position to prevent further losses.
4. Risk management is crucial for beginners
1. Keep leverage within 5x
The higher the leverage, the faster you die.
A 10x drop of 10% will liquidate you, while a 5x needs to drop 20% to liquidate.
2. Single trade stop-loss should not exceed 3% of capital
For example, if you have 100,000 in capital, you can lose a maximum of 3,000 on each trade.
If you get three wrong in a row, you still have 91% of your capital left to continue trading.
3. Try to trade major coins (BTC/ETH)
Manipulation costs are high, more stable, and less prone to spikes.
Smaller coins may seem thrilling but are actually dangerous.
4. Try to trade during regular hours (9:00-18:00)
Around 3 a.m. is a hotspot for liquidations, the fluctuations are illogical, and beginners should avoid it.
Final heartfelt words
Contracts can indeed make quick money, but whether you can make money in the long run depends not on luck, but on:
Direction + Discipline + Risk management.
First learn not to lose, then learn to make money.
Practice with a demo account first, then use small capital in real trading.
Prohibit gambling-style trading; those who tread this path steadily will go far.
$BTC #合约挑战