Contract trading is both an opportunity and a challenge for beginners. If you want to make money in contract trading, you not only need to master the basic operations, but also establish a sound strategy and a good risk management awareness. Here are some practical suggestions to help beginners reduce risks and steadily improve profitability:
1. Learn the basics
Understand how contracts work
Leverage mechanism: Contracts can magnify gains through leverage, but they also magnify losses. It is recommended that novices start with low leverage (2x-5x).
Two-way trading: contracts can be long (bullish) or short (bearish), allowing you to flexibly respond to market ups and downs.
Liquidation mechanism: Understand how the liquidation price is calculated and how to avoid liquidation.
Familiar with the trading platform
Use a safe and stable platform, such as Binance, OKX, etc., to conduct simulated transactions first and familiarize yourself with the operation interface and order rules.
Learn Technical Analysis
Master the basic knowledge of K-line charts and learn to judge support and resistance levels.
Learn several commonly used technical indicators (such as RSI, MACD, Bollinger Bands) to provide reference for trading decisions.
2. Start with small capital and low leverage
Control your position
It is recommended that beginners use 5%-10% of the total funds for a single transaction to avoid excessive loss of principal due to a single loss.
Don't operate with a full position. Even if the judgment is correct, short-term market fluctuations may lead to a margin call.
Reduce leverage risk
Although high leverage can bring high returns, it also carries extremely high risks. Newbies are advised to use low leverage (e.g. 2x-5x) to reduce the risk of liquidation.
Practice Demo Trading
A demo account can help novices become familiar with market fluctuations and trading operations and accumulate experience without taking any risks.
3. Develop a clear trading strategy
Trend is king
Go with the flow and avoid frequent operations in volatile markets. The success rate is higher in a big trend market (up or down).
Use moving averages (such as MA20, MA50) to determine the trend direction.
Set Take Profit and Stop Loss
When placing an order, set a clear goal: stop profit when the profit reaches a certain point, and stop loss when the loss exceeds the set range.
Generally, the stop loss is set at 3%-5%, and the take profit is set at 5%-10%.
Don't trade too frequently
Market fluctuations can easily make people impulsive, and frequent opening of positions will increase the probability of losses. Carefully screen trading opportunities and patiently wait for the right entry point.
4. Focus on risk management
Diversify your risk
Do not put all your funds into a single transaction or a single product; diversify your investments appropriately.
Reasonable use of margin
Keep enough margin to cope with short-term market fluctuations and avoid forced liquidation due to insufficient account funds.
Avoid emotional manipulation
The contract market is highly volatile. After suffering a loss, do not rush to double your investment to recover the loss. You need to analyze calmly before deciding on the next step.
5. Leverage community resources and tools
Learn from the experience of experts
Pay attention to KOLs (key opinion leaders) in the contract trading field and learn from their trading strategies.
Join a trading community to exchange experiences with other traders and get market updates.
Use assistive tools
Use quantitative tools or trading robots to help place orders and reduce the interference of human emotions.
Make rational use of market early warning tools to capture trading opportunities in a timely manner.
6. Pitfalls that Novices Need to Avoid
Don't be greedy and chase high prices
When prices have risen rapidly, avoid blindly buying at high prices, as this can easily lead to losses due to short-term pullbacks.
Stay away from high leverage and heavy positions
Excessive leverage and heavy positions will make your account extremely vulnerable to liquidation, so newbies must exercise restraint.
Don’t blindly follow orders
Copy trading may bring short-term gains, but lack of your own judgment will lead to an inability to cope with market fluctuations. Choose a reliable strategy provider and combine it with your own judgment.
VII. Conclusion
If a contract novice wants to make money, he needs to adhere to the following principles:
Learn knowledge: Continuously learn market rules and technical analysis.
Control risks: small capital, low leverage, and diversified investment.
Focus on strategy: trade with the trend and have clear profit and loss stop plans.
Practice diligently: gradually accumulate experience through simulated trading and actual combat.
Although the contract market has high returns, the risks are equally high. For novices, only by staying rational, constantly learning, and taking steady steps can they achieve long-term and stable profits in contract trading.
