I can sense your strong awareness of the risks in contract trading, and you understand the importance of discipline and stop-loss. This cautious attitude is very valuable in the volatile contract market. You know that setting a proper stop-loss is key to controlling risk, which already puts you ahead of many investors who trade blindly.
Short-Term Contract Trading Practical Guide
1. The Golden Rule of Position Management: First, I strongly recommend using the 2% rule—any single trade's maximum loss should not exceed 2% of total funds. For example, if your account has 10,000 USDT, then each trade can lose a maximum of 200 USDT.
The formula for calculating position size is simple: Position Size = Total Funds × 2% / Entry Price - Stop-Loss Price
Assuming you enter Bitcoin at 110,000 USD, with a stop-loss set at 109,500 USD, the risk is 500 USD. Thus, your position size should be 10,000 × 0.02 / 500 = 0.4 BTC. This way, even if the stop-loss is triggered, you only lose 200 USD, strictly controlling within 2%.
2. Three Efficient Stop-Loss Setting Methods
1. Technical Analysis Stop-Loss Method
When going long: Set the stop-loss 3-5% below the recent key support level.
When shorting: Set the stop-loss 3-5% above the recent key resistance level.
It is recommended to combine with the ATR (Average True Range) indicator, setting the stop-loss at 1.5-2 times the ATR value to avoid being swept out by normal fluctuations.
2. Time Stop-Loss Method
Short-term trading should never turn into long-term holdings. It is recommended to set a maximum holding time:
Ultra Short Term: Close positions immediately if there is no profit within 15-30 minutes
Intraday Trading: Exit decisively if the expected development does not occur within 2-4 hours
3. Moving Stop-Loss and Take-Profit Method
When the price moves in a favorable direction by 1.5 times the risk distance, if you risk 500 USD and profit reaches 750 USD, adjust the stop-loss to break-even. Then, with each new high/low, gradually move the stop-loss up/down to lock in some profits.
3. Psychological Discipline Execution Strategy
Setting a stop-loss is just the first step; the real difficulty lies in execution. I suggest:
1. Pre-Decide: Write down the plan before trading; if the price reaches X, I will execute Y.
2. Use Conditional Orders: All trading platforms provide conditional order functionality, allowing you to pre-set the stop-loss price and let the system execute it automatically.
3. Stay Away from the Screen: After setting the stop-loss, briefly step away from the screen to avoid emotionally modifying the stop-loss due to short-term fluctuations.
4. Daily Trading Log: Record the execution of stop-loss for each trade and review periodically for improvement.
4. Advanced Risk Control: Practical suggestions for OKX/Binance platforms
The commonly used OKX and Binance platforms for domestic investors both offer advanced stop-loss features:
1. Stop-Loss Limit Orders are better than Market Stop-Loss Orders—this can avoid significant deviations between the actual stop-loss price and the preset price due to slippage.
2. Enable Iceberg Order Function—large orders executed in batches to reduce market impact.
3. Use Platform API—if you have programming skills, you can set more complex stop-loss strategies through the API, such as dynamic trailing stop-loss.
Remember to check the order status every time after setting it, ensuring that the stop-loss order has been successfully placed in the system, rather than being a simple mental stop-loss.
The essence of trading is not the art of prediction but the game of probability. The difference between top traders and ordinary investors lies not in the number of correct judgments, but in the control of losses when wrong. There’s an old saying on Wall Street: Stop-loss won't make you bankrupt, not using stop-loss will. This statement amplifies a thousand times in contract trading.
Caution is your greatest asset. Maintain this risk awareness and strictly execute these strategies, and you will survive in the contract market and achieve stable returns. Follow Brother Lei and you won't get lost!!!
