Can you really play in the cryptocurrency market?
Many people are interested in cryptocurrency contract trading but don't know where to start. Today, I will share some basic knowledge and practical tips about contract trading.
1. What is contract trading❓
In simple terms, contract trading is an agreement between you and your trading counterpart to buy or sell a certain amount of digital currency at a specific price at a future time. You don't need to actually own these digital currencies; as long as you correctly predict the price trend, you can make money. For example, if you think Bitcoin will rise in the future, you can open a long position; if you think it will fall, you can open a short position.
2. Core concepts and operations🧐
1. Contract size: The minimum trading unit of a contract. Different digital currency contracts have different values per contract; for example, in the BTC/USDT perpetual contract, 1 contract may equal 0.001 BTC.
2. Leverage: You can use a small amount of capital to control a larger investment, but both profits and risks are magnified. For example, with 10x leverage, 1000 yuan of capital can control 10,000 yuan of contract value. However, the higher the leverage, the greater the risk of liquidation.
3. Opening a position: This can be divided into buying to open long (bullish) and selling to open short (bearish). For example, if the current price of BTC is 50,000 USDT and you buy 10 long contracts with 50x leverage, you would use 10 USDT as margin.
4. Closing a position: This means ending the contract trading to lock in profits or losses. You can choose to close at market price or at a limit price.
5. Liquidation: When your margin ratio falls below the maintenance level, the system will automatically close your position to prevent further losses.
3. Risk control❗
1. Control leverage: Beginners should try to keep leverage within 5x. The lower the leverage, the smaller the risk of liquidation. At 10x leverage, a 10% drop in the coin price could lead to liquidation; at 5x leverage, a 20% drop is needed for liquidation.
2. Set stop-loss: Individual stop-loss should not exceed 3% of the capital. For example, with 100,000 capital, each stop-loss should not exceed 3,000. This way, even if you make three mistakes, you can still retain most of your capital and have a chance to recover.
3. Choose mainstream coins: Mainstream coins (like BTC, ETH) have a higher cost of manipulation, making their prices relatively more stable with fewer spikes.
Although contract trading in the cryptocurrency market offers opportunities for high returns, the risks are also significant. Beginners must first learn the basics, practice a lot with simulated accounts, and then trade with small amounts of capital. Gambling is prohibited; be cautious with investments. The above is my personal opinion. I wish everyone can gain something in the cryptocurrency market~
