The following 15 definitions of terms that novices must know to enter the cryptocurrency circle will help them understand the cryptocurrency circle in seconds (must-read for novices). Friends who are just getting started can take a look at the definitions of terms in the cryptocurrency circle.
1. What is fiat currency? Fiat currency is legal tender, issued by the state and government and backed only by government credit, such as the RMB and the US dollar.
2. What does Token mean? Token is usually translated as "password". Token is one of the important concepts in the blockchain. It is more widely known as "token", but in the eyes of professional "blockchain" people, it is more accurately translated as "password", representing a proof of equity on the blockchain, rather than currency. In the traditional value system, only things that can be recorded in the ledger can be exchanged for value and circulated. Therefore, bookkeeping is the basis for generating wealth. However, in the real world, the vast majority of things cannot be quantified, and the things that can be recorded are extremely limited. But "Token" can. The magic of this thing is that Token can record physical assets and virtual digital assets in a digital way.
3. What does an airdrop mean? Airdrops are a very popular cryptocurrency marketing method. To provide potential investors and cryptocurrency enthusiasts with information about a token, token teams regularly distribute unknown tokens to accounts of participants in the cryptocurrency community. The amount is proportional to the number of tokens already in circulation. To receive more airdrops, you must purchase more tokens. This is a very effective marketing promotion method.
4. What is candy? When various digital currencies are first released and are in the ICO stage, these digital currencies are distributed free to users. This is a way for the issuer of the virtual currency project to build momentum and promote the project itself.
5. What does "breaking the issue price" mean? "Issuance" refers to the issue price of a digital currency, while "breaking the issue price" means a digital currency's price has fallen below the issue price.
6. What does a private placement mean? It's a way to invest in cryptocurrency projects and the best way for project founders to raise funds for platform operations. A private placement, as opposed to a public offering, simply means raising funds privately. This involves selling shares (cryptocurrency) to a small group of qualified investors, rather than through the public market.
7. What does ICO mean? Initial Coin Offering (ICO), derived from the concept of an initial public offering (IPO) in the stock market, is a financing activity in which a blockchain project exchanges its own virtual currency for a commonly used virtual currency in the market.
8. What are the current cryptocurrency trading platforms? Binance, OKEx, Poloniex, Bittrex, Bitfinex, Kraken, Huobi Pro, Gate, etc. 1. Basic features of virtual currency trading: (1) Trading hours: 24/7, all year round. (2) No price limits: Virtual currency trading has no price limits, while stocks do. For example, on May 28, Bitcoin's price rose by more than 20% in a single day. (3) Trading unit: The minimum purchase amount is 0.0001BTC (about 0.6 yuan). There is no minimum purchase limit of one lot (100 shares) for stocks. (4) Trading at any time: T+0. Stocks are traded on a T+1 basis, meaning you can buy stocks on the same day and sell them on the next trading day. Virtual currencies are traded on a T+0 basis, meaning you can buy and sell them on the same day. (5) No time limit for withdrawal and cashing out: You can withdraw and cash out at any time, with high liquidity.
9. Wallet Concept Generally speaking, it is equivalent to a personal bank card. If you are not confident in storing your virtual currency on the trading platform, you can store it in your personal wallet. There are many types of wallets. Some are for a single currency, such as EOS wallets, while others can store multiple currencies, such as imToken and Tokenpocket (TP wallet for short). The latter is more widely used.
10. Good/Negative News: Any news that helps stimulate price increases is considered good news. Conversely, any news that causes price drops is considered bad news, such as news about a trading platform being hacked and Bitcoin being stolen, or news of government suppression.
11. Public Chain / Private Chain / Consortium Chain: A public chain refers to a blockchain where anyone can participate in transactions and transactions are effectively confirmed. Currently, most blockchain systems are public chains, such as Bitcoin and Ethereum. Public chains are suitable for scenarios where everyone participates in full-scale maintenance, such as mutual insurance. A private chain refers to a blockchain where write access is limited to a specific organization or specific individuals. Read access can be granted externally or arbitrarily restricted. Developing enterprise-level applications based on private chains helps companies implement on-chain businesses. The immutability of on-chain information helps enhance a company's social credibility and strengthen investor and institutional confidence. A consortium chain refers to a blockchain where the consensus mechanism is jointly controlled by several institutions. The credit mechanism is maintained by these institutions. The legitimacy of all transactions requires confirmation from a majority or all of the institutions before they are recorded on the blockchain as valid blocks. Imagine a blockchain consortium formed by several credible financial institutions in the financial industry. Each institution operates a mining node. These institutions exercise consensus rights on behalf of all participants, maintaining the normal growth and operation of the blockchain.
12. Rebound/Consolidation/Pullback: A rebound is a temporary price increase within a generally declining trend, and the magnitude of the increase is smaller than the magnitude of the decline. A pullback is the opposite: a temporary decline within a generally rising trend. Consolidation refers to a period of relative price stability, with minimal fluctuations, and no volatile fluctuations. 1. Arbitrage: This refers to the transfer of the same cryptocurrency from a low-priced trading platform to a high-priced trading platform, profiting from the price difference.
13. Leverage Leveraged trading, as the name suggests, is the use of a small amount of capital to invest several times the original capital, in the hope of obtaining a return several times the volatility of the investment target, or a loss, which is somewhat similar to gambling.
14. Basic Principles of Virtual Currency Transactions
(1) Market Price Trading: Trading at the prevailing market price can, to a certain extent, ensure that investors’ buy and sell orders are executed promptly. However, at the same time, investors cannot predict the transaction price before placing a market order, which creates a certain degree of uncertainty. Generally speaking, the more volatile the market, the greater the risk of price uncertainty in market trading.
(2) Limit Order: Investors can set a buy price lower than the market price, or a sell price higher than the market price. When the market price fluctuates to the set price, the transaction is completed. If the set price deviates significantly from the market price, the transaction may fail.
(3) Basic principles of transaction: “price priority, time priority” principle. A higher buy price is better than a lower buy price, a lower sell price is better than a higher sell price. When the order price is the same, an order placed earlier is better than an order placed later.
15. Detailed explanation of common professional terms in the transaction process
Turnover rate refers to the frequency with which a currency is traded in the market within a certain period of time. It is one of the main indicators for evaluating the liquidity of a currency.
[Market Trading] means buying and selling at the current price. Market trading has priority. If you complete the transaction faster, you can use market trading.
[Limit Price Trading] is a transaction in which you buy or sell at a specified price, also known as a commission transaction or pending order transaction.
Cross-trading is a trading technique used by market makers. The specific operation method is to open accounts on multiple exchanges simultaneously and trade quotes between them in a seesaw manner to manipulate the price of the currency.
Wash trading is a method used by market makers to manipulate cryptocurrency prices, intentionally driving them down. They typically first drive up the price and then sell at a profit. During this process, market makers often intentionally place large sell orders to suppress the market, forcing low-priced buyers to sell their digital currency, thereby alleviating upward pressure and facilitating price increases.
[Market Support] When the price is low and the currency lacks popularity, large investors buy large quantities of the currency to prevent the price from continuing to fall.
Bull Market: A bull market refers to a generalized, sustained upward trend in market conditions with a positive outlook. (In the cryptocurrency world, this is primarily driven by the rise of BTC, which in turn leads to increases in other mainstream and altcoins.)
Bear Market: The exact opposite of a bull market, it refers to a period of sustained decline in market conditions, low market sentiment, and a continuous decline. (You are currently experiencing a bear market. During this phase, the most important thing is to survive. Then, further actions can be taken, such as hoarding coins and bottom fishing.)
[Monkey Market] I believe many people don't understand this phenomenon, which exists in the stock market. Why is it called a Monkey Market? Monkeys like to jump up and down, just like the ups and downs of our market. During a Monkey Market, the market is difficult to grasp. (The mainstream may rise today and fall tomorrow, or some copycat stocks may rise and others may plummet.)
The "Main Upward Wave" originates from Wave Theory and refers to the longest-lasting wave in a rising market. This is a common pattern in bull markets; catching a main upward wave promises significant profits. The opposite trend is also called a "main downward wave."
[Declining] The overall market trend is downward, but the trend is often up for two days and down for one day, which always gives people hope but always disappoints them.
Waterfall refers to a sudden, sharp decline in the market, characterized by several large, dazzling black candlesticks appearing in a short period of time, like a waterfall, cascading down, causing physical and emotional pain. Some also call it a "dive."
[Blowout] The market is affected by negative factors and is in a long-term slump. During this period, the market will be very depressed. When the negative factors are eliminated or the negative factors are removed, the market will show an explosive rise.
[Washing the market] Large financial groups such as bankers or project owners use funds to manipulate the market, causing the market trend to rise and fall, scaring off hesitant investors and making huge profits.
[Accumulation] Generally, the market makers will wash out the "leeks" by washing the market, and then the dealers will take over the coins sold by the "leeks", so that they have more chips in their hands and achieve the purpose of controlling the market (usually, accumulation and other operations will be carried out at low prices)
[Market Control] It's simple. I have a lot of money (I hold a large percentage of circulating coins), so I can easily manipulate the market by flipping it. The goal is simple: to make more money and profit from more leeks. [Leaves Harvesting] Some investors who lost money leave the market, while newcomers enter. Just like leeks, the harvest continues, one crop after another. The happiest ones are the market makers.
[Cheating] The dealer uses K-line to create an upward or downward trend, making us buy or sell, so as to achieve their goal of cutting leeks.
[Bonus] Also known as favorable news, it primarily refers to good news. Most people believe that favorable news will inevitably lead to a rise in the stock price. This is not the case. Bullish news and bearish news are not directly proportional to market increases; they simply have a certain impact and can stimulate the market.
[Negative news] is also news, mostly referring to news that is unfavorable to the market. However, there is also a saying in the market: when all the negative news is out, it will become positive news.
[Luring Long] After a long period of price consolidation, with a high probability of a fall, short sellers have already sold most of their virtual currency. Suddenly, short sellers drive up the price, tricking long sellers into buying in, believing it will rise. As a result, short sellers suppress the price, trapping long sellers. [Luring Short] After long sellers buy virtual currency, the price is deliberately lowered, causing short sellers to sell their holdings, believing it will fall. This leads them to fall into the long sellers' trap.
[Position] This is very simple, the ratio of your account funds to the funds you use to buy coins.
[Full Position] All account funds are used to buy Bitcoin. The phrases "full position" and "all in" often refer to full position.
[Adding to a Position] For example, if you hold BTC and its price drops, you buy more BTC to spread the cost.
[Adding to a Position] You hold BTC and are optimistic about its future, so you buy more BTC as it rises. [Building a Position] Also known as opening a position, this refers to using your account funds to buy a certain amount of a specific currency.
[Reduce Position] Sell some of the currencies held because risks are expected in the future market.
Anyone who trades leveraged futures should know this. It's very simple. Imagine you're trading leveraged EOS futures and you buy a 10,000 USDT long position and then open a 10,000 USDT short position. Think carefully about this and consider your position. [Short Position] means you're done trading and waiting. In the cryptocurrency world, this can be understood this way: your account only holds USDT and no other currencies. [Light Position] means the funds held in the purchased currency account for a very small percentage of your total funds. [Heavy Position] means the funds held in the purchased currency account for a large percentage of your total funds. [Half Position] means the funds held in the purchased currency account for half of your total funds. [Clear Position] means you're done trading, selling all your coins and preparing to go short and wait and see.
【Stop Profit】After obtaining a certain amount of profit, sell all virtual currencies to keep the profit
[Stop Loss] When the loss reaches a certain level, sell the virtual currency held to prevent the loss from further expanding. [Sideways] The market fluctuates slightly, and the rise and fall are around a range.
【Rebound】When the price of a currency is falling, it receives technical support or capital intervention, and the market turns from falling to rising.
[Reversal] The price of a currency has bottomed out, reaching its lowest point, and the downward trend has shifted to an upward trend. A common example is a "V-shaped reversal." A rebound is the foundation of a reversal, and the magnitude of a reversal is far greater than a rebound. [Arbitrage] It's quite simple to understand: spotting the price difference between platforms and profiting from it across platforms. When arbitrage is involved, pay attention to the speed of coin transfers, which can sometimes affect your profits.
[Over-the-counter trading] Many platforms are also called fiat currency exchanges. With the platform acting as a guarantor, merchants and individuals can directly use RMB to buy or sell their own mainstream cryptocurrencies or USDT. Trading is similar to Taobao (you get the idea). [Cutting losses] A more pleasant term is "cutting losses." Some of you often sell even when the price drops, fearing a further drop.
[Trapped] You buy a coin, and it falls in price. You can't bear to sell it. Congratulations, this is called being trapped.
[Unlocking a Lot] The coin you bought falls in value, and you're upset. Then, after a while, it rises again, and you're unlocked, and you're happy again.
[Missing the Market] When the market is bad, you buy. When the market picks up, you wait and see. This is a perfect miss. This is called missing the market.
[Roller Coaster] The coin you bought goes up, you're excited, and you brag to your friends about it, but a few days later it falls back down. It's like riding a roller coaster—it's a thrill for a moment, and then nothing happens.
[Hoarding coins] You are optimistic about the future development of this coin and want to make it tenfold, a hundredfold, or a thousandfold to achieve financial freedom. Then you buy a large amount of this coin and hoard it.
[Go Long] Also known as "long position", the buyer believes that the price of the currency will rise in the future, buys the currency, and then sells it at a high price after the price rises.
[Short selling] Also known as "short selling," this is the opposite of long selling. Sellers believe that the price of a currency will fall in the future, so they sell the currency they hold (or borrow it from the trading platform) and then buy it back at a lower price to make a profit after the price falls.
[Mining] The process of using computers, mobile phones and other devices to run computing programs to obtain digital currency. Note: Mining will shorten the life of the equipment.
【ICO】 Initial Coin Offering, originated from the concept of initial public offering (IPO) in the stock market, is a financing behavior in which a blockchain project exchanges its own virtual currency for commonly used virtual currency in the market.
[Private Equity Round] Private equity is relative to public equity. Public equity refers to the act of raising funds from an unspecified group of people. For example, a bank has been selling cryptocurrencies for more than 10 years. From a novice to a full-time crypto trader, I now have a stable monthly income of 7 figures and an annual income of 8 figures!
Let me tell you an executable plan: From a principal of 10,000, to 770,000, it only takes one month (especially suitable for beginners)
The following is a method I have personally tested: in less than a month in March, I made more than 700,000 yuan by playing with contract rolling!
Divide the principal of 10,000 into 10 parts
Use 1,000 yuan to roll over contracts and quickly accumulate 100,000 yuan! (It will take about 1 to 3 months)
1,000 yuan in the currency circle is about 140u!
The best solution is recommended: Contract
Use 30 U at a time to gamble on hot coins, setting stop-loss and take-profit targets. 100 to 200, 200 to 400, 400 to 800. Remember, this can only happen three times! Because the cryptocurrency world requires a bit of luck, it's easy to win nine times with this all-in bet and bust once! If you can get through three levels with 100, your principal will reach 1100 U!
It is recommended to use a triple strategy at this time
Make two types of orders a day, ultra-short orders and strategic orders, and then go for trend orders if the opportunity arises.
Ultra-short orders are used for quick attacks and quick attacks. Advantages of 15-minute orders: high returns Disadvantages: high risks
Only do big pancakes at the level of the concubine
The second type of order is the strategic order, which is to use a small position, such as 10 times 15u, to trade at the four-hour level. The profit is saved and then invested in the big pie every week.
The third type is trend trading. For medium and long-term trading, go directly to the market when you see the trend. Advantages: more profit
Find the right point and set a relatively cost-effective profit and loss ratio
Newcomers to the cryptocurrency world will encounter common mistakes. This is pure practical information, so take your time to read it!
1. Contract Leverage+
Some new traders don't understand leverage and assume that 100x leverage equals higher risk than 1x leverage. In reality, they're the same. For example, on the exchange I use, the floating profit and loss are the same for both opening a 1x position and a 100x position. The level of risk depends on your trend analysis, your entry point, and, crucially, position management.
2. How should I choose the right leverage? Personally, I prefer 100x leverage. For example, on the exchanges I use, 100x leverage allows for more open positions than 1x leverage, meaning the margin requirement is much smaller. If the trend is positive but my entry point isn't good, I can cover my position with a leveraged leverage to turn a loss into a profit. Covering a position is about increasing profits, not increasing risk.
2. Margin Call and Position Management
As mentioned above, covering a position is for greater profit, not to increase risk. Many novice traders certainly don't know how and how much to cover. I usually choose to cover at resistance and support levels. I don't cover at double or triple my position, which can achieve quick profits and reduce risk. As for position management, I will share my own experience. I generally enter the market with 25% or less, no matter how strong the trend is. I never enter with 50% or 100% of my position. As for why, I believe everyone knows that the more you cover, the greater the risk. The closer you are to the liquidation price, the more likely you are to encounter bad positions or market spikes. This allows for better risk control.
3. Stop-profit and stop-loss orders
It's not the veterans who know how to make money; it's the ones who know how to stop losses. Everyone understands this, but few actually follow it. New traders must develop the habit of using stop-loss and take-profit orders. Don't be too greedy for profits, lest a profitable trade turn into a loss. For example, if I'm bullish this hour, I'll go long near a support level. After I'm profitable, I'll sell some of it first, leaving some to continue rolling. If I see the trend is wrong, or if I reach a resistance level and can't break through, I'll sell everything. I personally believe that stop-loss orders are more important than take-profit orders. If the trend is wrong, or if you're chasing the top or bottom of a mountain, you should switch from long to short, or from short to long. Remember to stop-loss orders when they're due. Don't hold onto orders, otherwise, if the market goes one-way, your losses will only escalate until your position is liquidated. It's best to place stop-loss orders near support or resistance levels. Observe the market and your tolerance to determine the appropriate support or resistance levels for each cycle. Nothing is impossible in the cryptocurrency world; you should know this when you enter it. So, remember, be cautious. The money earned by luck will slowly be lost by your own strength.
3. Support and resistance levels
I've mentioned support and resistance levels several times before, but many people may not understand them. A support level is a point where the price repeatedly falls and then stops falling, triggering a rebound. A resistance level is a point where the price repeatedly rises and then stops rising, triggering a decline. So how should we interpret support and resistance levels? In fact, the support and resistance levels vary with each cycle. You can see them by connecting the highest and lowest points. The longer the cycle, the more valuable the reference.
4. Frequent Operation
Many new traders encounter this situation: frequent trading, sometimes opening long positions, sometimes opening short positions. This often leads to losses on both long and short positions, or even nothing left after deducting commissions. This bad habit must be broken. Remember, the most abundant thing in trading is opportunity. Opportunities exist every day, all the time. Don't rush. Not all opportunities can be seized, and not all opportunities can be capitalized on. It's not about quantity, but quality. Control your hands so that you don't easily lose your profits.
Bottom-picking rule: When a strong cryptocurrency continues to decline for nine consecutive days from a high level, it's likely a perfect signal to buy the dip. Don't hesitate; act decisively. This continuous decline often reveals genuine investment opportunities, a true gold mine. In the cryptocurrency world, a sharp price correction can sometimes be a great opportunity to acquire low-priced chips. Seizing such an opportunity can lay the foundation for subsequent wealth growth.
Take-profit rule: If the cryptocurrency you hold rises for two consecutive days, consider reducing your position to lock in profits. The cryptocurrency market is unpredictable, and there's no such thing as a perpetual rise. The most practical approach is to lock in profits promptly. Avoid missing out on the best take-profit opportunity due to greed, which could lead to profit-taking.
Rising Signal+: When a currency sees a 7% increase, it's just the beginning of a rally. Typically, the currency will continue to rise the next day due to inertia. Therefore, investors should closely monitor the market and avoid rushing out. Patiently wait for further price increases to maximize profits.
Trend Code+: For bullish coins with long-term growth potential, the optimal entry point is when the pullback ends. When investing in the cryptocurrency market, it's crucial to avoid blindly chasing gains and selling losses. Patiently wait for the market to correct and enter the market in line with the trend, like waiting for the wind to blow. Only then can you easily ride the wave of wealth growth.
Market Change Warning: If a currency price remains sideways for three days, further observation is warranted. If sideways movement persists for six days without a breakthrough, investors should decisively switch positions and avoid further losses. Prolonged sideways movement without a breakthrough often indicates an impending market change, and timely adjustments to investment direction can effectively mitigate risk.
The iron rule of stop-loss: If you haven't recouped your investment the next day, you should immediately exit the market. In cryptocurrency investing, stop-loss orders must be decisive and resolute. If you discover your investment is going in the wrong direction, you must quickly sell your losses. Hesitation often leads to greater losses. Strictly implementing a stop-loss strategy is the only way to maintain your strength in the market.
The Law of Continuous Rising: When a currency price rises for three consecutive days, it often indicates the possibility of a further five-day rally. On the fifth day, investors should exit while they're ahead. In the cryptocurrency world, knowing when to sell is the key to successful investing. Accurately timing your sales will maximize your profits.
Volume-Price Bible: When a currency breaks out from a low level with high volume, it's a clear entry signal. Increased trading volume indicates active market capitalization and the potential for continued price increases. Conversely, if high volume stagnates at a high level, it's a strong signal to sell at the top. At this point, investors should exit the market decisively to avoid being trapped in a price decline.
Moving Average Strategy+: In technical analysis, the 3-day moving average can be used to predict short-term trends, the 30-day moving average can assist in observing medium-term trends, the 80-day moving average often correlates with major uptrends, and the 120-day moving average can serve as a reference for long-term investments. Investors should choose currencies with upward moving averages and follow the trend to achieve steady profits while avoiding the fatigue and risks associated with frequent trading.
Counterattack Strategy+: Even with a small amount of capital, you can achieve substantial returns in the cryptocurrency market. The key is to resist the distraction of FOMO (fear of missing out) and adhere to strict trading discipline. Continue learning and practicing every day to improve your investment knowledge and skills by 1%. Through the power of compound interest, you can create miracles of wealth growth.
I'm Awen. I've experienced multiple bull and bear cycles and have extensive market experience in various financial sectors. Follow me here to penetrate the fog of information and discover the real market. Seize more opportunities to gain wealth and discover truly valuable opportunities. Don't miss out and regret it!
Contract Liquidation Prevention Guide
● Implement risk control measures. Contract trading is a high-risk investment behavior. Before engaging in contract trading, you need to develop a detailed risk control plan.
● Fund management. Reasonable fund management/allocation can effectively reduce risks and avoid contract liquidation.
● Control the leverage ratio. Controlling the leverage ratio is one of the important ways to avoid contract liquidation.
● Stop loss in time. Stop loss is more difficult than stop profit.
What is a contract margin call?
This refers to a situation in which, due to rapid or drastic market price fluctuations, the user's account margin is insufficient to maintain their existing contract positions, resulting in forced liquidation and liquidation of losses. The principle of margin call can be expressed as follows: Margin Ratio = (Account Equity + Unrealized Profit and Loss) / (Contract Value * Leverage). When the margin ratio falls below the maintenance margin ratio, a forced liquidation mechanism is triggered, whereby the platform automatically closes all of the user's contract positions at the best market price, deducting the corresponding handling fees and funding rate. If market price fluctuations are so significant that the liquidation price falls below the bankruptcy price (the price at which account equity reaches zero), a liquidation loss will occur. Not only will the user lose all their margin, but they may also be required to compensate the platform or other users for losses.
Why is it easy to get liquidated?
The fundamental reason for contract liquidation is that market price changes exceed users' expectations and affordability, resulting in insufficient margin to support contract positions.
Due to the leverage effect, futures trading carries a high level of risk. When the price moves against you, you must close your position promptly to prevent further losses. If you fail to do so, your margin will gradually decrease until it reaches the liquidation level. If your margin falls below the liquidation level, your position will be forcibly closed, and all funds will be liquidated.
Specifically, there are the following common situations:
Overweight positions: Some users, seeking higher returns, choose higher leverage or open a larger number of positions, resulting in a lower margin ratio and greater risk exposure. This can easily trigger a forced liquidation point if the market experiences adverse fluctuations.
Not setting a stop-loss: To avoid frequent stop-losses or missing rebound opportunities, some users choose not to set a stop-loss or set loose stop-loss conditions, which results in an inability to control losses in a timely manner. This can easily lead to a margin call if the market fluctuates violently.
Arrogance and refusal to admit mistakes: When faced with adverse market fluctuations, some users, out of self-denial or self-consolation, are unwilling to admit their misjudgment and instead continue to hold on or increase their positions, leading to ever-increasing losses. This can easily lead to a margin call if the market experiences extreme volatility.
How to avoid margin calls?
Control levers
So, how much percentage of a contract will cause a margin call? The answer is: it depends on your leverage ratio and margin level.
For example, suppose you use $10,000 with 5x leverage to buy $50,000 worth of Bitcoin. This is equivalent to a 20% margin investment. If Bitcoin rises 20% the next day, your Bitcoin is worth $60,000, representing a $10,000 profit. However, your principal was only $10,000, so this represents a 100% return. However, if Bitcoin falls 20% the next day, you lose $10,000, effectively wiping out your principal. If this continues, the platform will also lose the money it lent you. Therefore, the platform will force you to sell your Bitcoin to recoup the loan and interest. This is called a forced liquidation. You're left with nothing, both your money and your Bitcoins, without even the chance to wait for the price to recover. This is a complete liquidation.
In fact, for novice users participating in contract trading for the first time, when opening a position, they should choose an appropriate leverage ratio and position size based on their financial situation and risk tolerance, and avoid excessive greed or fear. Generally speaking, the margin ratio should be kept above 10%, and the leverage ratio should be kept below 10x.
Set a stop loss
While properly controlling leverage can mitigate the risk of liquidation to a certain extent, the crypto market is characterized by high volatility. Even with controlled leverage, one can still be shaken out by dramatic market fluctuations. Therefore, while properly controlling positions, we also need to set stop-loss points/lines.
A stop-loss order can be considered part of your exit strategy for every trade you enter. Once the price reaches a predetermined level, these orders are executed, closing your long or short position and minimizing losses. Whether you prefer to trade using candlestick charts, trendlines, or technical indicators, with a stop-loss order, you never have to worry about exiting a trade or second-guessing your decision. For example, a trader entering a long position based on an ascending triangle can quickly determine where to place the entry. The height of the triangle's Y axis generates a potential target, while the pattern's hypotenuse indicates a point of invalidation.
I strongly recommend setting a stop-loss/exit point for every futures trade, as no one knows what the cryptocurrency market will do on a given day. Therefore, a stop-loss helps protect you from the unknown and better understand the expected outcomes of each position you open. Setting a stop-loss is simple when opening a position on Bitget. Simply go to [Contracts], select [Take Profit/Stop Loss], and enter your stop-loss price. Bitget's futures trading platform allows you to set up to 20 stop-loss points, effectively protecting your contract account's principal.
Suppose you purchased a BTCUSDT contract for $10,000 on Bitget Futures. To minimize potential losses on this trade, you could set a stop-loss order at 20% below the purchase price (i.e., $8,000). If the price of BTCUSDT falls below $8,000, your stop-loss order will be triggered. The exchange will then sell the contract at the current market price, which could be exactly the trigger price of $8,000 or significantly lower, depending on current market conditions.
It's important to note that stop-loss orders aren't a foolproof way to prevent forced liquidation. In the crypto market, forced liquidation prices can fluctuate. Setting a stop-loss order can only mitigate the risk of a margin call, but it can't prevent forced liquidation. This can be a significant drawback for novice traders, so before beginning futures trading, it's crucial to clearly define your maximum acceptable loss. The most straightforward approach is to set your investment amount equal to your maximum stop-loss amount. This means that once you've determined your maximum single loss, you should use that figure as a guideline for placing trades.
Fund Management
Money management, as we all know, is a method of adjusting position sizing to reduce risk while maximizing the potential growth of your trading account. This strategy limits the capital invested in any one trade to a certain percentage of your account value. For beginners, 5%-10% is a reasonable percentage. The dollar value of this range will rise and fall with changes in your account value and ensure that you don't overexpose your entire account to a single position.
Due to the unpredictable and volatile nature of cryptocurrencies, you can lose your entire investment in a matter of minutes when investing in highly leveraged derivatives like perpetual futures contracts. Therefore, investors should adhere to stricter limits; a rule of thumb when trading volatile assets is to risk only 5% or no more than 10% of your capital on a given trade.
For example, let's say you have 10,000 USDT in your Bitget futures account. In this case, you'd risk 500-1,000 USDT per trade. If a trade goes wrong, you'll only lose 5% or 10% of your account. Good risk management means having the right position size, knowing how to set and trail stop-losses, and considering the risk/reward ratio. A solid money management plan allows you to build a portfolio that won't keep you up all night.
It's important to note that while money management can reduce your risk, overtrading is crucial. Overtrading occurs when you have too many open positions or risk a disproportionate amount of capital on a single trade, exposing your entire portfolio to excessive risk. To avoid overtrading, it's essential to stick to a trading plan and adhere to the discipline of your pre-planned strategy.
Most new traders are notorious for overtrading, often due to a failure to control emotions like greed, fear, and excitement. While traders can achieve huge profits by opening a large number of positions, losses can be equally devastating. A prudent way to limit losses on all positions is to set a cap on the amount of capital you risk at any one time.
For example, if you have 25 contracts open simultaneously, even though you risk 1% on each contract, (and almost anything can happen in the cryptocurrency market) all 25 trades could go against you simultaneously and result in a significant loss of 25% on your portfolio.
In addition to the risk per trade, you should also consider the cumulative risk across your entire portfolio, also known as your total risk capital. As a general rule, your total risk capital should be less than 10% of your portfolio. This means that if you risk 1% of your portfolio per trade, your maximum open position is 10.
Final Thoughts
In contract trading, the risk of margin calls is a common issue for every investor, so investors should learn how to avoid them. This article discusses how to properly set leverage, set stop-loss points, and manage funds to mitigate risk. These are all effective risk control measures that can help investors achieve more stable returns in contract trading. Before engaging in contract trading, investors are advised to understand the Bitget platform rules, market trends, and other relevant information to accurately predict the market.
Giving roses to others leaves a lingering fragrance on your hands. Thank you for your likes, attention, and reposts! I wish you all financial freedom in 2025!
To put it bluntly, playing in the cryptocurrency world is a battle between retail investors and market makers. If you don't have cutting-edge information and first-hand data, you will only be exploited! If you want to join in the planning and harvest the market makers together, please come to (Official Account: Crazy People Chat Trends) and welcome like-minded cryptocurrency enthusiasts to discuss together~
The martial arts secrets have been given to you. Whether you can become famous in the world depends on yourself.
Be sure to save these tips and read them several times. If you find them useful, share them with your fellow cryptocurrency traders. Follow me to learn more about the cryptocurrency world. After the rain, I'm willing to hold an umbrella for the leeks! Follow me, and let's move forward together on the cryptocurrency journey!
