The essence of a contract is a 'future price agreement' in the crypto space, called Future in English, which follows the same logic as 'paying a deposit to place an order' in our daily lives—only you don't actually have to use real coins; it's purely gambling on the future price trend of a certain cryptocurrency.
Its measurement unit is 'contract', where 1 contract is equivalent to 1 agreement:
Opening 1 contract: This means you have signed a new agreement with your trading counterpart, and the total market contract open interest will increase by 1;
Taking over someone else's contract: This is a 'second-hand agreement', where you fulfill the original commitment on behalf of someone else, and the total open interest remains unchanged.
My core viewpoint: Don't think that 'contract' sounds more advanced than spot trading; it is essentially a 'gambling tool'—the tool itself is neither good nor bad, but when beginners use it, they are likely to become fodder for the market!
2. Contracts vs Spot: It’s not just about 'holding or not holding coins', it’s a matter of life and death!
Spot trading is very simple: 'one hand pays money, one hand takes coins'. After buying coins, you put them in your wallet, and the price fluctuations only concern you. At most, you get stuck, but you won’t lose everything;
But contracts are completely different:
You don’t need to hold the cryptocurrency; you are only betting on the 'future price' — if you are bullish on Bitcoin and I am bearish, we sign a contract and settle based on the actual price at expiry;
The core is 'zero-sum game': every penny you earn is a loss for someone else; and vice versa, there are no good things like 'everyone earns together';
The biggest feature: you can add leverage and short (betting on price drops) — these two functions make contracts 10 times more exciting than spot trading, but also make the 'speed of going to zero' 10 times faster!
My heartfelt advice: Beginners shouldn't be obsessed with the fantasy of 'making money by shorting' right away; two-way trading = two-way liquidation risk. If you haven’t even figured out spot trading, touching contracts is purely self-destructive!
3. The truth about leverage: it’s not that 'higher multiples are better', but 'you die faster'!
Many newcomers think 'leverage = speed of making money', so they immediately max out at 100 times, only to find that a 1% drop brings them to zero — this is the core logic of leverage that they fail to understand!
Here's a simple example (the numbers are arbitrary, just follow the logic):
Assuming the current Bitcoin price is 100,000 yuan, the margin for one contract on a compliant platform is 100 yuan, and the platform states 'up to 100 times leverage':
Theoretically: 100 yuan margin can leverage a contract value of 10,000 yuan (100 yuan × 100 times);
But the actual leverage = contract value ÷ your actual margin!
If you only put 100 yuan as margin, the actual leverage is 100 times. If the price drops by 1%, you lose 100 yuan directly (liquidation);
But if you deposit 5000 yuan as margin into your account, the actual leverage becomes 2 times (10,000 yuan contract value ÷ 5000 yuan margin). Even if it drops by 5%, you only lose 250 yuan, and won't get liquidated!
My exclusive summary: Leverage is the 'ceiling' given by the platform, not the 'standard' you must use! Beginners should control their actual leverage to 2-5 times to survive; it’s not about who can leverage more aggressively, but about who lasts longer!
In the end: 3 heartfelt pieces of advice for beginners
Contracts are not a 'quick wealth tool', but a 'quick selection tool for novices'; 90% of beginners get liquidated because of 'greed + lack of understanding of the rules';
Get familiar with spot trading first, then touch contracts! If you can't even grasp the volatility patterns of cryptocurrencies, adding leverage is no different from running naked across the street;
Never invest all your principal into contracts! It's recommended to use 'money you won't miss' to test the waters, like 5%-10% of your total funds. Even if you get liquidated, it won’t affect your life.
