1. The most stable way to trade contracts in the crypto space
Choose the right coins and be a good person. As a leveraged trader, volatility can be amplified by leverage, and the primary consideration during trading should not be volatility but certainty.
In a rising market, go long on the strongest coins; conversely, in a falling market, short the weakest coins.
For example, at the start of a new quarter, the strongest upward trends are EOS and ETH; the preferred long positions during pullbacks are these two cryptocurrencies. During declines, the preferred short position is Bitcoin. Even if the final result shows that mainstream cryptocurrencies drop more than Bitcoin, solely shorting or chasing Bitcoin can greatly reduce the risk of violent rebounds.
Most traders in the crypto space are short-term traders, and during trading, it is often difficult to stick to ideal exit points. They are also not very skilled in position control and cannot rely on fluctuations to average down. Given this situation, for most traders, a good entry price outweighs everything.
Once you have a profit, take some off the table for safety, and set a stop loss at the cost price for the remaining portion. This is something I have emphasized in my community.
The essence of contract trading strategies
(1) Identify the main trend and enter trades in the direction of the main trend; otherwise, do not enter.
(2) If you are trading with the trend, entry point:
1. Breakthrough points of the trend;
2. Breakthrough points of consolidation trending in one direction;
3. Points of pullback in an uptrend or rebound points in a downtrend.
(3) Trading with the trend will bring you substantial profits; never exit early.
(4) If your entry aligns with the larger trend and your paper profit has proven you are correct, you can employ pyramid-style techniques to add to your position; (refer to point 2)
(5) Keep your position unchanged until the trend reverses.
(6) If the market trend is opposite to your entry, stop-loss and exit quickly.
In addition to adhering to the above strategies, remember three qualities: discipline, discipline, and discipline!
The way of trading is to accumulate small amounts into larger ones; compounding is king. If you deviate from your cost, you must resolutely avoid turning back into a loss. If you have made a profit, make sure to take some off the table to prevent it from going to waste. In summary: if you make a profit, take bold action; for the remaining part, set a stop-loss at the original cost.
2. Tips for making money with perpetual contracts
1. Avoid full margin trading
How should funds be allocated? Fund allocation should be understood from two perspectives:
Firstly, understand fund allocation from a risk perspective, and clearly define how much loss your account can or is prepared to endure. This is the basis for our fund allocation thought process. Once this total amount is confirmed, consider how many times you can afford to lose to the market before you willingly accept your misfortune and admit failure.
Personally, I believe that the most adventurous methods should also be divided into three attempts. In other words, you should give yourself at least three chances. For example, if the total account funds are 200,000, and the client allows you to lose a maximum of 20%, which is 40,000, then I suggest your most adventurous loss plan is: 10,000 for the first time, 10,000 for the second time, and 20,000 for the third time. I believe this loss plan has a certain degree of rationality. Because if you do it right once out of three times, you can make a profit or at least continue to survive in the market. Not being kicked out of the market is itself a form of success, and there is a chance of winning.
2. Grasp the overall market trend
Trends are much harder to trade than fluctuations because trends require riding the ups and downs, which requires holding positions firmly, while buying high and selling low aligns well with human nature.
Trading means the more it aligns with human nature, the less money you make; it's precisely because it's difficult to execute that it brings profit.
In an upward trend, any violent pullback should be an opportunity to go long. Remember what I said about probability? So, if you are not in the trade or have exited, be patient and wait for a 10-20% drop before going long boldly.
3. Set specific profit-taking and stop-loss targets
Setting profit-taking and stop-loss levels is key to determining whether you can be profitable. In several trades, we need to ensure that total profits exceed total losses. Achieving this is not difficult; just follow these points:
① Each stop-loss should be ≤ 5% of total funds;
② Each profit should be > 5% of total funds;
③ Total trading win rate > 50%
Meeting the above requirements (profit-loss ratio greater than 1 and win rate greater than 50%) can achieve profitability. Of course, high profit-loss ratios with low win rates or low profit-loss ratios with high win rates are also possible. Anyway, as long as the total profit is positive, it’s sufficient: total profit = initial capital × (average profit × win rate - average loss × loss rate).
4. Remember not to trade too frequently.
Since BTC perpetual contracts trade non-stop 24 hours a day, many newcomers trade almost every day, making almost every trading day in a month. As the saying goes: walking by the river, how can one avoid getting wet? The more you trade, the more likely you are to make mistakes. After making mistakes, your mindset can deteriorate, and a bad mindset may lead to impulsive decisions, choosing 'revenge' trades: possibly going against the trend or over-leveraging. This can lead to a series of mistakes, easily resulting in significant losses that may take years to recover.
3. What types of contracts are there?
Perpetual contract: A perpetual contract has no expiration date, allowing users to hold it indefinitely and close positions at will.
Futures Contract: A futures contract has a specific delivery date, including this week, next week, this quarter, and next quarter futures contracts. When the specific delivery date arrives, regardless of profit or loss, the system will automatically settle the contract.
USDT margin contract: This means you need to use the stablecoin USDT as collateral. As long as you have USDT in your account, you can conduct contract trading for multiple cryptocurrencies, with profit and loss settled in USDT.
Coin-based margin contract: This is a contract that uses the underlying cryptocurrency as collateral. Before trading, you must hold the corresponding cryptocurrency, and the profit and loss are settled in that cryptocurrency.
