I will provide an executable plan. If you can follow through, it is feasible to turn a few thousand into 1 million.
Let me share my method with everyone: Quickly turn a few thousand into 100,000, and there is only one way: (rolling positions)++
Step 1: Start by converting your several thousand into U and divide it into three parts!
Step 2: Make contracts three times +, with a multiple of 100, and a position of 60% each time, all-in, just trade Bitcoin or Ethereum, operating time: between 9:30 PM and 4 AM!
Step 3: Make three contracts; if you win all three normally, your capital could reach several thousand U, and if there is significant market movement, it could reach tens of thousands of U.
Step 4: Continue the previous day's operations by splitting the principal into three parts and performing the same operation three times!
1. Discuss the essence of price; if there is a trading pair tokenA/tokenB, how is the price of tokenA determined?
Price is the result of supply and demand. Price is the ratio of the liquidity (quantity) of A to B. A and B are two parts of a liquidity pool, known by the constant product formula of trading exchange rates x*y=k; therefore, when a large amount of token A is bought, it will lead to a shortage of token A, resulting in a price increase.
The relationship between supply and demand determines the price of token A. The first is the AB trading pair, where liquidity operations determine the initial trading rate. If this rate is too high or too low compared to the market, arbitrage traders will quickly eliminate the gap until the market reaches a normal level.
2. Discuss the relationship between liquidity and price.
Liquidity itself has no relation to price; the only factor affecting price is supply and demand. Sufficient liquidity can reflect that the market has been fully traded, and the price is the result of fierce competition, while products with low liquidity may deviate significantly from their actual value.
3. Describe in your own words what limit orders and market orders are.
Limit orders refer to orders that must be executed at a specified price.
If the price of BTC is 6500 USD and the investor wants to buy at 6300 USD, they need to submit a buy order at 6300 USD, so once the price reaches 6300 USD, there is a chance for the order to be executed. If the price drops below 6300 USD, the order will definitely be fully executed, and the average execution price will usually be below 6300 USD.
A market order will execute the order at the current price of the virtual currency. If the latest price of BTC is 6500 USD, then the execution price is likely to be this price or close to it.
4. Describe in your own words what isolated margin and cross margin are.
[Cross Margin] means all available balances in the account can serve as collateral to avoid forced liquidation. 'Putting all in', 'going all-in' are both cross margin. The benefit of this model is that as long as the leverage is moderate, the likelihood of liquidation is very low, so it is often used for hedging and quantitative trading.
[Isolated Margin] When a user's position is liquidated, the loss will only affect the margin amount of that position and will not impact other funds in the contract account. Under the isolated margin model, the margin is the maximum loss for the user.
For example, if you have 10 USDT in your contract account, when opening a position, you invest 1 USDT in trading, then you still have 9 USDT available in the contract account. In the isolated margin case, you can use up to the 1 USDT invested when opening the position, and the remaining 9 USDT is unaffected; you can amplify your profits with leverage while having limited risk. In the cross margin case, if the initially invested 1 USDT is insufficient as margin, it will automatically transfer USDT from the remaining 9 USDT in the contract account to the contract position to avoid forced liquidation. This allows your contract position to better withstand adverse short-term market fluctuations.
5. Are the contract market+ and spot market+ settled separately or together?
Settlements are separated. The spot market is one market, and contracts are another market. Trading with spot does not affect the contract market, so they are separate.
6. What is the funding rate in contracts? Why is the funding rate designed? If the funding rate is 0.02%, does the short pay the long or does the long pay the short? Does this represent that the contract price is higher or lower than the spot price?
The funding rate is the price balancing mechanism of perpetual contracts, indicating the periodic fee paid to long or short traders based on the price difference between the perpetual contract market price and the spot price.
Because perpetual contracts do not have a settlement mechanism like term contracts with an expiration date, when the price of a perpetual contract deviates from the spot price, most exchanges currently use the funding rate to adjust the contract price to prevent significant deviations from the spot price. When the market trend is bullish, the funding rate is positive and increases over time. In this scenario, long traders of perpetual contracts will pay funding fees to the counterpart traders. Conversely, when the market is bearish, the funding rate is negative, and at this time, it is the short traders of perpetual contracts who pay funding fees to the long traders.
0.02% long pays short means the contract price is higher than the spot price.
7. What are the two operations that shorting essentially combines? Why short?
First, borrow high and sell, then buy back after it drops and repay, thus buying at a lower price and selling at a higher price, just selling first and buying later to make a profit. Shorting is a way to profit during the price decline of an investment. Through research/analysis, if there is a reason to be bearish, shorting an asset will yield profits if the investment price drops; generally, the lower the price, the more profit you make in the trade. For example, if Bitcoin's current price is 60000, I predict it will drop to 58000 tomorrow or in a few days, I short it; if it doesn’t drop but instead rises, I will incur losses.
8. If the price of Ethereum is 1200, and the contract shorts at 1x with a margin of 2600, at what price of Ethereum will you be liquidated? A 1x short means a 100% increase (1/1) will lead to liquidation at 2400.
9. If the price of Ethereum is 1200, and the contract goes long at 10 times, with a margin of 2600, at what price of Ethereum will you be liquidated?
Going long at 10 times, a 10% drop (1/10) will lead to liquidation, at 1080 it drops 1/N.
10. What is the initial margin used for?
The initial margin is the minimum margin required for a user to open a position. For example, if the initial margin is set at 10%, for a contract worth $1,000, the required initial margin would be $100, meaning the user has leveraged 10 times. If the available margin in the user's account is less than $100, the opening trade cannot be completed.
11. What is the relationship between margin rate and leverage multiple?
Leverage multiple = 1/margin rate. Leverage multiple is inversely proportional to the margin rate. For example, if you want to trade 1 standard lot of USD/JPY without margin, you will need $100,000 in your account. But if the margin requirement is only 1%, you only need to deposit $1,000 in your account. The leverage provided for that trade is 100:1.
12. How to explain the term 'holding a position+'? Hint (initial margin, maintenance margin)
Holding a position simply means the unwillingness to close a position to stop losses, due to the reasons of not wanting to admit one's mistakes or not wanting to lose the principal. So you need to hold the position until you can say, 'I was right,' feeling like you have defeated the market.
13. How to explain the term liquidation, hint (initial margin, maintenance margin) What is liquidation?
Liquidation occurs when your available margin is 0; without available margin, you cannot trade. Trading liquidation means that the loss exceeds your account's available funds after removing the margin. The remaining funds after forced liquidation are the total funds minus your losses, and usually, a portion remains.
14. Which is used to settle liquidation, the mark price or the latest price? What are the differences between the mark price and the latest price, and why is there a mark price?
14. Which is used to settle liquidation, the mark price or the latest price? What are the differences between the mark price and the latest price, and why is there a mark price? The mark price is used to calculate the user's unrealized profit and loss+, the estimated triggering price for forced liquidation, and to tally the user's funding fees.
Its purpose is to enhance the stability of the contract market and reduce unnecessary liquidations during abnormal market fluctuations. The latest market price refers to the current market price of the platform. The latest market price is always anchored to the spot price due to the funding fee mechanism, which is why the latest market price does not deviate too far from the spot market price.
15. Describe unrealized profit and loss in your own words.
Unrealized profit and loss refers to the profit or loss you hold in your current open orders. This equals the profit or loss that would be 'realized' if all your open orders were immediately closed. Unrealized profit and loss is also known as 'floating profit and loss' because the value constantly changes as your position remains open. If you have open orders, your unrealized profit and loss will fluctuate with the current market price (or 'float'). For example, if you currently have unrealized profit, if the price moves against you, the unrealized profit may turn into unrealized loss.
16. Suppose your initial margin is 1000 U, the funding rate is 0.1%, and your leverage multiple is 10 times long. How much funding fee do you need to pay/receive in a day with three settlements?
1000 U * 0.1%103 = 30 U.
17. Describe hedging in your own words.
Because contracts are traded in both directions, buying long and short simultaneously is equivalent to not making a profit or loss, which is a form of hedging. This is also known as locking the position [because excessive losses can lead to liquidation or forced closing].
18. Which is less likely to be liquidated, low leverage or high leverage?
It cannot be said that low leverage is more dangerous or high leverage is safer; such statements are one-sided. The accurate statement is that under equal position sizes, low leverage can withstand smaller fluctuations and is closer to the liquidation price. As for leverage choice, it is more about personal trading systems and habits. Any high return inevitably comes with high risk, and many who discuss contracts only emphasize contract profits without mentioning risks; this is quite frightening.
