Contracts in the cryptocurrency market (such as perpetual contracts and futures contracts) may pose certain difficulties for beginners, but they are not complex once you understand their core logic. Here are straightforward explanations of key points to help you get started quickly:
What is a contract?
'Essence': A leveraged trading tool that allows you to amplify gains (or losses) with a small amount of margin.
'Example': If you use 100 USDT to go long on BTC with 10 times leverage, it's equivalent to participating in price fluctuations with 1000 USDT of principal, and profits and losses are calculated based on 1000 USDT.
Core concept analysis:
'Leverage multiple':
- 5 times, 10 times, 100 times, etc., the higher the leverage, the greater the risk.
- 'Risk warning': At 10 times leverage, a 10% price reversal can lead to liquidation (principal goes to zero).'Margin':
- The funds frozen when opening a position, divided into 'initial margin' (required to open a position) and 'maintenance margin' (minimum requirement to prevent liquidation).'Liquidation':
- When losses cause the margin to fall below the maintenance standard, the system will forcibly liquidate the position.
- 'Example': If you open a long position of 100 USDT with 10 times leverage and BTC drops by 10% → loss of 100 USDT (entire principal lost).'Perpetual vs Futures contracts':
- 'Perpetual': No expiration date, but there is a 'funding rate' (both long and short parties pay fees periodically to anchor the spot price).
- 'Futures': Has a fixed settlement date and liquidates at an agreed price upon expiration.
Why is it difficult to understand? Common misconceptions:
'Common misconception 1': 'Contracts = gambling'
- In fact, it requires combining technical analysis and position management; blindly using high leverage is roughly equivalent to gambling.'Common misconception 2': 'The more margin, the safer'
- The key lies in 'leverage multiple' and 'position ratio'. Opening high leverage with full margin can lead to liquidation with slight fluctuations.'Difficult point':
- There are many detailed rules regarding funding rates, mark prices, liquidation mechanisms, etc., which require practical familiarity.
Beginner's suggestions for Xiaobai:
'Simulated trading practice':
- Start by familiarizing yourself with the operations using simulated trading on exchanges (like Binance, OKX).'Start with low leverage':
- Begin with 3-5 times leverage to avoid instant liquidation from high leverage.'Risk control is essential':
- Set stop-loss (e.g., automatic liquidation at a 5% loss), never use full margin.'Understand the funding rate':
- When the rate is positive, longs pay shorts; the opposite is true for a negative rate. Long-term positions need to pay attention to costs.In summary:
Contracts in the cryptocurrency market are a 'magnifying glass'; if used well, they can lead to efficient profits, but if not, they can accelerate losses. The key is: 'low leverage, strict stop-loss, and not being greedy'. Beginners are advised to learn first before practicing to avoid paying 'tuition'.
