Contract trading can increase the utilization of funds. When the market fluctuates, you can quickly achieve the goal of making money.
Taking ETH price as an example, on May 15, 2025.
ETH price: 2600 USD
Contract with 100 times leverage.
Using 100 times leverage is equivalent to increasing capital by 100 times; conversely, the price is decreased by 100 times.
For convenience in calculations, we usually calculate using a price reduced by 100 times. That is, if ETH fluctuates by 26 points, the position yields a 100% profit.
There are only two situations below:
Going long (bullish):
At a price of 2600, rising to 2626 results in a position profit of one time / 100% profit.
At a price of 2600, rising to 2652 results in a position profit of two times / 200% profit.
At a price of 2600, dropping to 2574 results in a position loss of one time / -100% profit.
At a price of 2600, dropping to 2548 results in a position loss of two times / -200% profit.
Short selling (bearish):
At a price of 2600, rising to 2626 results in a position loss of one time / -100% profit.
At a price of 2600, rising to 2652 results in a position loss of two times / -200% profit.
At a price of 2600, dropping to 2574 results in a position profit of one time / 100% profit.
At a price of 2600, dropping to 2548 results in a position profit of two times / 200% profit.
There are only these two situations in the market: rising and falling.
Be sure whether it is going up or down; there are many judgment criteria.
1. Judgments based on large and small cycles, including weekly K, daily K, 8 hours, 4 hours, 1 hour, 15 minutes, and 5 minutes.
Bearish K and bullish K are both representations of price.
2. Judgments based on indicators, including volume, moving averages, and Fibonacci levels.
3. Judgments based on news. Download Jinshi data; important news has a 5-star importance level. When 5 stars appear, market fluctuations will be significant.
In addition to direction being important, position management is also crucial. Position management refers to the ratio of principal to open positions.
With a principal of 100,000, if 10,000 is opened, the position is 10%.
At an ETH price of 2600, with a position of 10%, a fluctuation of 10*26=260 points is needed for forced liquidation.
For digital currencies, unless there is a large unilateral move, intraday fluctuations of over 200 points and price changes of 300-500 points are very rare. Most fluctuations are within 200 points. (You can check the daily candlestick chart, where the distance between highs and lows is often less than 150 points.)
From the above, we can conclude: Most of the time, fluctuations below 10% will not lead to liquidation. Trading seeks high probability events. If you fear liquidation, you can divide your capital into three parts and operate gradually. You must ensure this time you can avoid liquidation, so you have capital for the next operation.
Of course, you can also allocate based on the size of the funds:
Below 100,000: 10% position can be practiced freely every day.
100,000 to 300,000: Develop a habit of using stop-loss.
For amounts above 300,000: position is less than 5%. Use stop-loss.
The above can be further divided into several levels based on trading time periods:
1. Those who have never traded contracts
2. Contract trading for less than half a year
3. Contract trading for less than 1 year
4. Contract trading for 1-2 years
5. Contract trading for over 2 years
Different levels correspond to different amounts of capital. The lower the level, the smaller the capital, and the more frequently you need to practice.
Learn contract trading, and the future will be tenfold returns. Mastering one skill can be applied to other trading currencies later.
Based on the basic system framework above, when discussing trading, knowing the fundamentals, operations are further divided into three types based on position and point relationships:
A. Stop-loss
Stop-loss can be fixed at 60 points, with even position operations. A fluctuation of 60 points in a day may indicate a trend reversal or an incorrect directional judgment at that time. After a stop-loss, judge again based on market conditions before opening a new position. It’s normal for half of the fluctuations to be 60 points up or down, followed by a pullback of 30 points.
Re-enter after a stop-loss can reduce the floating loss at that time.
B. Pull average price
If ETH drops from 2600 to 2500, adding a hand brings the average price to 2550. Wait for the price to rebound above 2500 before reducing the position.
This operation is used in half of the fluctuating trends; without setting a stop-loss, it can still ensure no loss, converting floating losses into floating profits.
C. Long-short locking
This means opening a long position and then opening a short position.
Locking positions usually secures profits. It captures rebounds and increases profit points.
There is also position locking. Locking losses is a last chance to save oneself. In cases of severe trend fluctuations and unclear direction, locking in positions allows for reassessment the next day and unlocking after the trend stabilizes. This requires a high level of skill; advanced traders can profit regardless of how the market moves, as they are adept at using position management and locking strategies to turn floating losses into floating profits.
The above is the underlying logic of contract trading. (Personal opinion, please don't criticize) Besides practicing more, honing your market sense, the experience of liquidation is also a type of experience. Those who have never faced liquidation can never operate with large amounts of money.
On the road of trading, learn more, ask more, and make up for deficiencies. Humility never goes out of style; the market is the best teacher.
