Recently, many people have asked: 'Spot trading is slow; can contracts help recover losses quickly?' This is like asking 'Is bungee jumping without a rope more thrilling?' — it can be, but the likelihood of disaster is high. Today, I'll explain contracts in the simplest terms for beginners; understand it before deciding whether to engage.

1. What exactly is contract trading? To put it simply, it's 'betting on price movements.'

You don't actually need to buy coins; you just need to guess whether the price will go up or down. For example, if Bitcoin is currently at 30,000 dollars, and you think it will rise, you 'go long'; if you think it will fall, you 'go short.' If you're right, you make money; if you're wrong, you lose money. It's that simple.

But how is it harsher than spot trading? It involves leverage. With a principal of 100, using 10x leverage is equivalent to trading with 1000. If it rises by 10%, you can earn 100 (doubling your capital); but if it drops by 10%, your principal is wiped out. This is called 'liquidation.' Last year, a fan used 20x leverage to trade DOGE, and because it dropped by 5%, 5000 was gone in an instant.

2. These pitfalls can cost newbies six months of losses.

Higher leverage is not always better.

Some people always think 'high leverage means quick profits,' but think about it: with 100x leverage, a 1% price fluctuation can make your heart race; being a little greedy, a single 'spike' from the exchange can burst your position. Newbies are advised to use a maximum of 5x leverage, which can withstand a 20% fluctuation, giving you a chance to wait for a market reversal.

The margin is not a deposit; it can be consumed.

The margin you use to open a position is not just sitting there. If the price drops, the margin will be deducted bit by bit until it's gone, resulting in liquidation. Last year, a student opened a long position on ETH and forgot to set a stop loss before sleeping; the price dropped by 15% overnight, and when they woke up, their account had only 0.3 USDT left, too late to cry.

Transaction fees are higher than you think.

You pay a fee when opening a position, another fee when closing it, and if you hold a position for more than 8 hours, you also incur a 'funding fee.' A novice traded 8 times in one day and spent over 300 USDT on fees alone; the profits weren't enough to cover working for the exchange. Remember: frequent trading = giving money to the platform.

3. Newbies want to trade contracts? First, take care of these 3 things.

Practice with a simulated account for 3 months first.

Platforms like Huobi and Binance have 'simulated contracts' where you can practice with virtual coins. Only switch to real money after you can trade for a month straight without liquidation. Focus on practicing two things: setting take profit and stop loss, and maintaining a mindset that can withstand volatility.

Never open a position exceeding 10% of your capital.

Even if you are optimistic about the market, don't go all in. With a capital of 30,000 USDT, use a maximum of 3000 USDT per trade; even if you lose, you still have 90% of your capital left to recover. This strategy can help you survive in the crypto market for an additional 5 years.

Remember the 'three no's.'

Don't place trades late at night (from 3-5 AM, spikes are likely), don't trade unfamiliar coins (newly listed altcoins are often heavily manipulated), and don't trade based on emotions (trading out of anger will surely lead to losses). Last year, I avoided liquidation risks 6 times by following these 'three no's.'

Lastly, let me be honest: if you can avoid it, don't touch contracts. If you really want to learn, ask yourself three questions: Can you accept losing everything overnight? Can you resist the urge to chase prices? Can you limit yourself to checking the market only three times a day?

If there's an answer that is 'no,' then you are only suited to trade spot for now. If you find this useful, hit follow, and tomorrow I'll teach you how to steadily make money with spot trading. Share your most confusing points about contracts in the comments, and I will answer them one by one.

Remember, there are countless ways to make money in the crypto world; don't start by choosing the hardest path.