When it comes to rolling over Bitcoin, many investors may be confused. In fact, rolling over Bitcoin is a mechanism in Bitcoin contracts that means positions must be closed before the contract expires. This can put investors in a disadvantageous position. If an investor has been in a losing position before expiration and decides to add to their position, they will have to continue rolling over and pay higher maintenance margin costs as prices fall, which can increase their losses. Many investors may want to understand more about what rolling over Bitcoin means, so let's delve deeper.
What does rolling over Bitcoin mean?
Rolling over Bitcoin refers to the practice in Bitcoin futures trading where investors close their existing contracts before expiration and open new ones at the same price to extend their holding period. This operation is usually done to avoid physical delivery or cash settlement on the expiration date and allows investors to maintain their positions and continue participating in the market. The term 'rolling over' may sound intimidating, but it can be interpreted as a method of increasing positions with unrealized profits, which is a common technique in futures trading.
Typically, rolling over occurs some time before the futures contract expires because exchanges do not allow rollover operations on the expiration date. During the rollover period, investors need to pay attention to market fluctuations and changes in contract prices to decide when to roll over for the best trading price. Rolling over Bitcoin involves leveraged trading in contracts, so it carries high risks. Investors should carefully understand contract rules and market trends, handle rollover operations cautiously, and adopt appropriate risk management strategies to control risk.
What are the risks of rolling over Bitcoin?
The biggest risk of rolling over Bitcoin is the use of leverage, which is a high-risk tool. In fact, the concept of rolling over itself is not risky; it is one of the correct approaches to futures trading. The risk lies in leverage. In leveraged trading, both 10x leverage and 1x leverage can be rolled over. Therefore, the core issue of risk is the investor's choice of leverage. If rolling over is done with low leverage, the risk factor is generally not very high.
Investors do not need to maintain leverage of 5 to 10 times when rolling over; two to three times is sufficient. The goal is to maintain total positions at two to three times the unrealized profits. Below are three suitable scenarios for rolling over, as compiled by the editor.
1. The direction chosen after a long-term horizontal volatility low
2. Buying the dip after a significant drop in a bullish market
3. Breaking through major resistance/support levels on a weekly chart
There are only three scenarios where the odds are relatively high; all other opportunities should be abandoned.
The above content is a detailed answer from the editor regarding what rolling over Bitcoin means. For investors, when conducting Bitcoin rollover operations, it is crucial not to choose high leverage for trading. Additionally, unrealized profits in a partial position cannot be used to increase positions; only unrealized profits in a full position can be used. In a full margin mode, the forced liquidation price may constantly change because the balance is affected by other positions, while the initial margin occupied by each position is independent of the account balance. However, the remaining balance is shared among all positions, and the available balance will be affected by the unrealized gains and losses of all existing positions.