Beginner's Entry: How to trade contracts? Master the basic knowledge and ensure good risk control.
Contract trading is a type of financial derivative trading that allows investors to choose to buy long or sell short contracts by predicting market ups and downs, thus gaining profits from price fluctuations. For beginners, entering the field of contract trading may feel unfamiliar and full of challenges. This article aims to provide a comprehensive and in-depth beginner's guide by combining the basic knowledge of contract trading, operational strategies, risk control, and the characteristics of different products.
I. Basic Knowledge of Contract Trading
1. Definition of Contract Trading
Contract trading refers to the transaction where both parties agree to receive a certain quantity of a specific asset at a designated price at a specified time in the future. This trading method allows investors to leverage their investment for potentially larger gains, but it also comes with high risks.
2. Types of Contract Trading
Contract trading is mainly divided into futures contracts and perpetual contracts. Futures contracts have fixed delivery dates, and physical delivery or cash settlement must occur upon expiration. Perpetual contracts, on the other hand, do not have fixed delivery dates and can be held indefinitely until the investor chooses to close the position.
3. Basic Operations of Contract Trading
In contract trading, investors can perform two types of operations: opening a position (buying or selling a contract) and closing a position (selling or buying back a held contract). When opening a position, investors need to select the trading variety, contract type, trading direction (long or short), trading quantity, and leverage. When closing a position, investors need to choose an appropriate time to exit the market based on market conditions.
II. Beginner's Entry Strategies
1. Choose a safe trading platform
For beginners, choosing a safe, stable, and reliable trading platform is the top priority. When selecting a platform, attention should be paid to the platform's regulatory situation, fund safety, trading varieties, fees, and user experience. Feedback and evaluations from other investors can also be referenced to ensure that the chosen platform meets their needs.
2. Learn about contract trading knowledge
Before officially entering contract trading, beginners should take time to learn relevant knowledge. This includes understanding the basic principles of contract trading, operational rules, risk control methods, and market analysis methods. Learning can be done through reading relevant books, participating in online courses, watching instructional videos, etc.
3. Develop a trading plan
Before engaging in contract trading, beginners should develop a detailed trading plan. This includes determining trading goals, risk tolerance, trading varieties, leverage, profit-taking and stop-loss points, and trading times. Developing a trading plan helps beginners maintain calmness and rationality, avoiding blindly following trends and impulsive trading.
4. Start with small trades
As a beginner, it is recommended to start with small trades and gradually accumulate experience and confidence. During the trading process, one should pay attention to market dynamics and price trends, adjusting trading strategies in a timely manner. Additionally, learning to control positions and risks to avoid excessive trading and heavy trading is important.
III. Contract Trading Strategies for Different Products
(1) Digital Currency Contract Trading
Digital currency contract trading is a new type of contract trading that has emerged in recent years. It uses digital currencies such as Bitcoin and Ethereum as underlying assets, allowing investors to trade by predicting market ups and downs. For beginners, digital currency contract trading features low thresholds, simple operations, and flexible trading times. However, due to the significant price fluctuations of digital currencies, the risks are also relatively high.
Strategy Recommendations:
1. Pay attention to digital currency market dynamics and price trends, and understand fundamental and technical analysis methods.
2. Choose contract varieties with large trading volumes and good liquidity for trading.
3. Set reasonable profit-taking and stop-loss points to avoid blindly chasing rising prices or selling at losses.
4. Control position and risk, avoid heavy trading and excessive trading.
(2) Commodity Futures Contract Trading
Commodity futures contract trading is a method of contract trading where the underlying assets are bulk commodities (such as crude oil, gold, copper, etc.). This trading method allows investors to trade by predicting market ups and downs, and physical delivery is also possible. For beginners, commodity futures contract trading is characterized by a wide variety of products, large trading volumes, and good liquidity. However, due to the price fluctuations of bulk commodities being influenced by various factors (such as supply and demand relations, policy changes, etc.), the risks are also relatively high.
Strategy Recommendations:
1. Pay attention to the price trends of bulk commodities and fundamental analysis (such as supply and demand relationships, policy changes, etc.).
2. Choose contract varieties with large trading volumes, good liquidity, and moderate price fluctuations for trading.
3. Set reasonable profit-taking and stop-loss points to avoid blindly chasing rising prices or selling at losses.
4. Control position and risk, avoid heavy trading and excessive trading.
5. Understand the rules and processes of physical delivery to facilitate delivery when needed.
(3) Stock Index Contract Trading
Stock index contract trading is a method of contract trading where the underlying assets are stock indices (such as CSI 300, NASDAQ 100, etc.). This trading method allows investors to trade by predicting market ups and downs, and cash settlement is also possible. For beginners, stock index contract trading features low thresholds, simple operations, and flexible trading times. However, due to stock index price fluctuations being influenced by various factors (such as macroeconomic data, policy changes, etc.), the risks are also relatively high.
Strategy Recommendations:
1. Pay attention to stock index market dynamics and price trends, and understand fundamental and technical analysis methods.
2. Choose contract varieties with large trading volumes, good liquidity, and moderate price fluctuations for trading.
3. Set reasonable profit-taking and stop-loss points to avoid blindly chasing rising prices or selling at losses.
4. Control position and risk, avoid heavy trading and excessive trading.
5. Understand cash settlement rules and processes to facilitate settlement when needed.
IV. Risk Control and Mindset Management
1. Risk Control
Contract trading is highly risky, making risk control crucial. Beginners should set reasonable profit-taking and stop-loss points during contract trading to avoid blindly chasing rising prices or selling at losses. They should also control position and risk, avoiding heavy trading and excessive trading. Additionally, they should pay attention to market dynamics and price trends, adjusting trading strategies in a timely manner.
2. Mindset Management
Contract trading requires maintaining calmness and rationality, avoiding being swayed by emotions. Beginners should maintain a good mindset during contract trading, avoiding making wrong decisions due to greed or fear. They should also learn to accept losses and failures, summarize experiences and lessons, and continuously improve their trading skills.
V. Conclusion
Contract trading is a high-risk, high-return investment method that is both challenging and full of opportunities for beginners. By understanding the basic knowledge of contract trading, operational strategies, risk control, and the characteristics of different products, beginners can better get started and master the skills and methods of contract trading. Maintaining calmness and rationality, continuously learning, and accumulating experience are also key to successfully engaging in contract trading.
