Contract trading is a common trading model in financial markets, already existing in the stock market and various trading markets, and is now also favored by investors in the cryptocurrency space. Its core logic is to amplify the capital scale through leverage, allowing investors to quickly double their returns through buying up or down operations. The following are the core knowledge and precautions for contract trading:
I. Classification of Contract Types
According to the holding period, contracts are mainly divided into perpetual contracts and delivery contracts:
Perpetual contract: There is no fixed expiration date, users can hold positions for a long time, completely deciding when to close the position, with high flexibility.
Delivery contract: There is a clear delivery date, specifically including this week, next week, this quarter, and next quarter delivery contracts. When the agreed delivery date is reached, the system will automatically execute the delivery operation, regardless of whether the current position is in profit or loss.
II. Explanation of Margin Types
The types of margin in contract trading are mainly divided into USDT margin contracts and currency-based margin contracts, with the specific differences as follows:
USDT margin contract: Uses the stablecoin USDT as collateral. As long as the account holds USDT, it can participate in contract trading of multiple currencies, and the settlement of profits and losses from trading is based on USDT.
Currency-based margin contract: Uses the trading underlying currency itself as collateral. Before trading, users must hold the corresponding underlying currency, and the settlement of profits and losses from trading is also based on that underlying currency.
III. Analysis of Full Position and Isolated Position Modes
Full position and isolated position are two different margin management modes in contract trading, with the core difference being the sharing and independence of margin rules:
Full position mode: All positions in the account share the same margin, and the profits and losses of different positions can offset each other, with risks and returns being holistic.
Isolated position mode: The risks and returns of each position are independent of each other, with each position's margin usage and profit and loss being calculated separately, without mutual influence.
IV. Definition of Core Trading Operations
The core operations of contract trading include 'buy to open long' and 'sell to open short', corresponding to different market prediction strategies:
Buy to open long: When predicting that the market price will rise, buy the contract at a suitable price, wait for the price to rise and then sell to close the position, earning the price difference, the operation logic is consistent with 'buy first, sell later' in spot trading.
Sell to open short: When predicting that the market price will fall, sell the contract at a suitable price first, wait for the price to fall and then buy to close the position, earning the price difference, referred to as 'sell first, buy later'.
After opening a position, users can view detailed order information in the [Position] section of the trading interface and can set take profit and stop loss parameters as needed or directly close the position.
V. Precautions for Contract Trading
To ensure trading safety and avoid unnecessary risks, special attention should be paid to the following matters:
Margin rate risk warning: Regardless of whether the single currency margin mode or cross-currency margin mode is used, when the margin rate ≤ 300%, the system will send a margin reduction warning to the account, requiring close attention to position risk; when the margin rate ≤ 100%, the system will cancel unfulfilled orders according to the rules and trigger forced liquidation, so it is essential to manage positions well to prevent liquidation risk.
Independence of Isolated Position Mode: In isolated position mode, the positions in single currency margin mode and cross-currency margin mode are independent of each other, and their respective risks and returns do not affect each other.
Full position mode margin rules:
In the single currency margin full position mode, all positions in the same settlement currency share a single margin.
In the cross-currency margin full position mode, all assets in the trading account will be uniformly converted into USD based on the preset conversion rate, serving as the margin for all positions.
Cross-currency margin mode convenience feature: In cross-currency margin mode, if the [automatic borrowing] feature is enabled, there is no need to hold USDT or the underlying currency in advance, allowing direct participation in USDT margin contracts or currency-based margin contract trading.
