Many people are interested in contract trading in the cryptocurrency market, but they 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 specific amount of cryptocurrency at a specific price at a future time. You don't need to actually own the cryptocurrency; you just need to correctly predict the price trend to make a profit. For example, if you think Bitcoin will rise in the future, you can go long; if you think it will fall, you can go short.
2. What types of contracts are there? 📑
1. Perpetual contract: There is no expiration date, and it can be held indefinitely. Its price is anchored by the funding rate and spot price, with the funding rate settled every 8 hours, and both long and short positions pay fees to each other based on the rate.
2. Delivery contract: Has a fixed expiration date, and is settled or delivered in kind at the expiration date based on the spot price. For example, quarterly contracts, semi-annual contracts, etc.
3. Core concepts and operations
1. Lot size: The minimum trading unit of a contract. Each lot of different cryptocurrency contracts represents a different value; for example, for a BTC/USDT perpetual contract, 1 lot may equal 0.001 BTC.
2. Leverage: Allows you to control a large investment with a small amount of capital, but both profits and risks are magnified. For example, with 10x leverage, a 1000 yuan capital can control a contract value of 10000 yuan. However, the higher the leverage, the greater the risk of liquidation.
3. Opening a position: This can be divided into buying long (bullish) and selling short (bearish). For example, if the current price of BTC is 50000 USDT, you can buy 10 lots of long positions with 50x leverage, occupying a margin of 10 USDT.
4. Closing a position: This means ending the contract trading and locking in profits or losses. You can choose to close at market price or limit price.
5. Forced liquidation: When your margin ratio falls below the maintenance level, the system will automatically close your position to prevent further losses.
4. Risk control
1. Control leverage: Beginners should try to keep it under 5x. The lower the leverage, the smaller the liquidation risk. With 10x leverage, a 10% drop in price may lead to liquidation; with 5x leverage, a 20% drop is needed for liquidation.
2. Set stop-loss: The stop-loss for each trade should not exceed 3% of the capital. For example, with a capital of 100,000, stop-loss for each trade 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 high manipulation costs, prices are relatively more stable, and there are fewer price spikes.
4. Pay attention to trading times: Try to avoid the 'liquidation peak period' around 3 a.m., and choose to trade during the day (9:00 - 18:00).
Although there are opportunities for high returns in cryptocurrency contract trading, the risks are also significant. Beginners must first learn the basics, practice extensively with demo accounts, and then trade with small amounts. Gambling is prohibited; investment should be cautious. The above is my personal opinion, and I wish everyone success in the cryptocurrency market.

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