First point: What are contracts?
Contract trading refers to transactions where both parties agree to receive a certain quantity of an asset at a specified price at a future date. In simple terms, it means predicting whether a certain coin will rise or fall at a future point in time and choosing to buy long or sell short contracts to gain from price fluctuations. Many beginners start operating without even understanding what contracts are. Winning may be attributed to luck, while losing is seen as fate.
Second point: Recognize your risk tolerance.
Many newcomers enter the market wanting to make big money, unable to accept the low returns from spot trading over time. They wish for a quick gain and opt for leveraged contracts. Here, I advise beginners to refrain from rushing into contracts due to the high volatility in this space, which can lead to losses in an instant. Those new to trading often have low psychological resilience, and substantial losses can lead to extreme self-blame and negativity. If you have established your risk tolerance and are willing to allocate part of your assets to try, then please read on.
Third point: Control over the overall market.
Many newcomers to contract trading easily fall into misunderstandings, thinking it's simply about buying high or low while overlooking a serious detail: the control of overall market conditions, which we can also refer to as judgment. For example, if the overall market is poor, insisting on buying long can easily lead to losses. Before engaging in contracts, please make your own assessments of the overall market. We can base our decisions on the current state of the cryptocurrency market, recent reports concerning the coins we wish to contract, and predictions about their future price ranges. Specifically, I recommend downloading market analysis apps such as Feixiaohao, Aicoin, and BiCoin.
Fourth point: The leverage multiplier of contracts.
The most thrilling aspect of contract trading is determining whether the coin will rise or fall in the future. You can choose an appropriate leverage multiplier to enhance your returns. For example, leverage risk: it's easy to understand. If you trade using 10x leverage and the price drops by 2%, your loss is amplified tenfold, resulting in a 20% loss. Moreover, the volatility in these trades is not as small as stocks; a fluctuation of 1% or 2% can be quite random. The platform may have a big player who, on a whim, sells off, causing the price to plummet. Therefore, beginners must understand the risks associated with leverage. However, remember not to rush into high multipliers; the higher the multiplier, the greater the risk. A slight fluctuation can lead to liquidation. It’s advisable for beginners to keep the leverage below 10x.
Fifth point: Assessing erroneous decisions.
Walking by the river often gets your shoes wet. Most traders have an optimistic mindset. Sometimes, when our judgment is wrong and a downturn occurs, what should we do? Here, we need to understand the significance of stop loss. Many might question that a stop loss is a loss; initially, we might just have an unrealized loss, but if we really execute a stop loss, it becomes a realized loss. However, this understanding is too simplistic. An example shared online is quite illustrative: a stop loss is like a seatbelt in a car; most of the time, it seems unnecessary. Often, when you stop loss, a significant rally occurs. Some people might stop loss during fluctuations only to keep losing. The purpose of a stop loss is to prevent you from losing too much money.
Sixth point: Reasons for losses during operations.
(1) Never back down; vow to hold on to your position.
Most newcomers choose to hold on! Don’t back down! Maybe it’ll come back soon. This holding mindset is often gambling psychology; if you're lucky, you might squeak by, and naturally, you'll think your holding won't be wrong. But suddenly, one time you might be liquidated. For example, recent bearish comments from EOS’s BM were initially perceived as a slight correction, but many believed it was fine to continue holding. However, as the situation escalated uncontrollably, the market makers took advantage and many were liquidated. This is the destructive impact of black swan events on holding positions.
(2) Unable to resist temptation, continuously adding to positions.
Sometimes after opening a position, you realize your judgment was correct, and the price rises by a few or even several percentage points. Tempted, you may rush to add to your position, investing hundreds to thousands. If you're lucky and the price keeps rising, the additional position may earn you a good profit, but this risk is immense. Sometimes, continuously adding to your position can worsen your situation, making you more susceptible to losses or even liquidation during corrections. Here, I recommend that beginners only add to their positions when the contracts in hand are already profitable, and to do so gradually. Never add margin to a losing contract; learn to stop loss. It’s better to take a loss and re-enter than to add to a losing position.
Seventh point: How to reduce your own risks.
(1) Set a risk tolerance point.
For instance, if you have a capital of 10,000 for trading, and you can bear a contract loss of 5,000, then you can use this 5,000 as your contract fund. If losses exceed your limit, stop trading contracts.
(2) Search for a feel for trading in spot markets, as spot trading won’t wipe you out immediately.
Find your rhythm in spot trading; know the best times to buy and sell. Build your psychological resilience to trading losses, as many feel immense pain even from small losses.
(3) Don’t think you are a trading god; mere profit requires a deeper market understanding.
Understand that even the best have experienced liquidation; who among the big shots on Weibo hasn’t? Countless people face liquidation daily, often with substantial amounts. Desire can lead one to forget risks and become greedy, often losing direction and incurring more losses.
(4) Develop a plan.
If you take out 5,000 to play, you could split it into 10 parts, using 500 each time. This way, at least a couple of the 10 trades will likely be profitable. If you can’t make a profit in one or two attempts, I suggest you stick to spot trading; your trading fundamentals and luck may need improvement. This way, even if you misjudge trades and stop loss, your losses won’t be too significant. Of course, I will discuss stop loss strategies later. Position control determines your profitability; making money is just about minimizing your trading losses and maximizing your profits.
(5) Manage your positions well.
Trade with small positions when the trend is unclear; even if you incur a loss, it will be minor. When an opportunity arises, trade with half or full positions. This is what we refer to as a one-way market, where we can invest heavily because we aim to make significant profits.
(6) Don’t use overly high leverage for contracts; learn to take breaks.
As mentioned before, the higher the leverage, the higher your risk, and the lower the margin. A slight fluctuation could lead to liquidation. Additionally, transaction fees can be substantial. If liquidation or significant losses occur, take a break before re-entering the market.
Contracts are never gambling. Manage your position well, and by not rushing, being greedy, or panicking, you can earn steadily!
1. Risk Management.
Position Control: Invest only a small portion of funds in each trade to avoid heavy positions and reduce the impact of a single trade on overall capital.
Stop Loss Setup: Set stop loss points in advance to prevent losses from expanding and protect your capital.
2. Emotional Management.
Be patient: Avoid impulsive trading and wait for the right entry opportunity.
Don’t be greedy: Set reasonable profit targets, take profits timely, and avoid missing exit opportunities due to greed.
Stay calm: Remain composed in the face of market fluctuations, execute trades as planned, and avoid emotional trading.
3. Strategies and Plans.
Trading Plan: Develop a clear trading plan that includes entry, exit, and risk management strategies, and strictly adhere to it.
Diversified Strategies: Combine different strategies such as trend following and arbitrage to spread risk.
4. Continuous Learning.
Market Analysis: Continuously learn technical and fundamental analysis to improve judgment skills.
Review and Summarize: Regularly review trading records, identify issues, and improve strategies.
5. Tool Usage
Leverage Caution: Use leverage reasonably to avoid excessively magnifying risks.
Automation Tools: Use tools like take profit and stop loss orders to reduce emotional interference.
6. Mindset Adjustment.
Long-term Perspective: Focus on long-term stable profits rather than short-term windfalls.
Accepting Losses: Losses are part of trading; maintain a calm mindset and avoid letting losses impact your attitude.
Summary
Contract trading requires strict discipline and a good mindset. Through effective risk management, emotional control, and continuous learning, you can improve your success rate and achieve stable profits.
Why do most people lose when trading contracts?
1. Unable to understand candlestick charts and trends.
2. Unable to understand news impact.
3. Immediately chasing trades upon seeing market movement, fearing to miss opportunities.
4. Wanting to earn more after making a profit, mindless greed.
5. Selling to recover losses or running after making a small profit.
6. The market maker must be watching my trades.
If you have the above mentality, then trading is not suitable for you.
Feeding Mode: Provide entry points, staggered entry levels, and stop loss points that even beginners can understand.
* Strictly follow the strategy; only if you make money will it be sustainable; losing money brings me no benefit.
Currently in a bull market, opportunities abound, and we share secrets daily.
Keep an eye on $BTC, ETH, PEPE.
