Perpetual contracts, also known as perpetual forward contracts, are standardized contracts signed on exchanges that stipulate the buying and selling of a certain amount of cryptocurrency at a specific price at a certain future time.
Unlike delivery contracts, perpetual contracts have no fixed delivery date, allowing investors to choose to close their positions at any time based on market conditions.
The trading mechanism of perpetual contracts includes funding rates, a mechanism established by exchanges to keep contract prices close to spot prices.
The positive or negative funding rate determines whether long positions or short positions pay, with payment cycles usually every 8 hours.
Perpetual contracts allow for high leverage, meaning investors can control large positions with relatively small amounts of capital. High leverage brings the possibility of high returns but also increases risk. If predictions are wrong, investors may face significant losses.
Perpetual contracts are widely used for speculation and hedging strategies. For example, investors can profit by going long (predicting price increases) or going short (predicting price decreases).
Moreover, perpetual contracts can also be used for arbitrage, i.e., holding both spot and perpetual contracts simultaneously to earn profits from funding rate differences.
In ten years of navigating the cryptocurrency market, I grew a capital of 100,000 to several million! Here are some insights I hope will help my fellow traders achieve financial freedom sooner!
1. For strong cryptocurrencies that have dropped consecutively for nine days from a high position, be sure to follow up promptly.
2. For any cryptocurrency that has risen for two consecutive days, be sure to reduce your position promptly.
3. For any cryptocurrency that rises more than 7%, there is still a chance of further increases the next day; you can continue to observe.
4. For strong bull cryptocurrencies, be sure to wait until the correction ends before entering the market.
5. If any cryptocurrency shows low volatility for three consecutive days, observe for another three days; if there is no change, consider switching it out.
6. For any cryptocurrency that fails to recover the previous day's cost price the next day, exit promptly.
7. On the rise, if there are three at the top, there are five; if there are five, there are seven. For cryptocurrencies that have risen for two consecutive days, buy on the dip; the fifth day is usually a good selling point.
8. Volume and price indicators are crucial; trading volume is considered the soul of the cryptocurrency market. When the price breaks out at low levels during consolidation, it needs attention; when there is a high volume stagnation at high levels, it is wise to exit decisively.
9. Only choose cryptocurrencies that are in an upward trend for trading, maximizing the odds and avoiding wasted time. When the 3-day line turns upward, it indicates short-term rises; when the 30-day line turns upward, it indicates medium-term rises; when the 80-day line turns upward, it indicates a main upward trend; when the 120-day moving average turns upward, it indicates long-term rises.
10. In the cryptocurrency market, small funds do not mean no opportunities. As long as you master the correct methods, maintain a rational mindset, strictly execute strategies, and patiently wait for opportunities to arise.
You can also achieve a reversal of wealth in this land full of opportunities. Remember, while the cryptocurrency world is promising, the risks are also significant. Only through continuous learning, summarizing experiences, and constantly improving oneself can one go further!
Ten key tips for trading in the cryptocurrency market to enhance your profitability!
1. Do not chase highs or panic sell; capture the big trend and determine buy and sell points. This means avoiding following the crowd to chase highs and blindly selling during downturns, instead focusing on the overall market trend to determine buy and sell points, aiming for steady returns.
2. Combine technical analysis with fundamental analysis to seize market opportunities. When trading in the cryptocurrency market, utilize both technical and fundamental analysis to find market opportunities. This can increase the probability of successful trades while reducing risks.
3. Be cautious when averaging down; diversify to reduce risk and pressure. During market fluctuations, avoid rashly averaging down. Diversify to lower risk and pressure, while reasonably controlling position sizes and leverage to prevent excessive losses.
4. Maintain stop-loss and take-profit points, adjust self-discipline psychologically, and view it from a long-term perspective.
5. In a bear market crash, regardless of how much the held cryptocurrency drops, quickly switch to the top 30 cryptocurrencies by market capitalization.
6. Only look at the 4-hour chart; ignore the rest. If there are more green bars than red in the last three months and they are distinct from each other, buy in and wait for the rise.
7. Shift your mindset; in a bear market, focus on those cryptocurrencies with rapidly increasing trading volumes that enter the top ten, engage in short-term trades, and avoid holding.
8. Make a detailed investment plan; before entering the market, ensure you have a detailed investment plan, including entry and exit points, position sizes, trading frequency, and methods for dealing with unexpected situations, etc.
Two reasons for novice trading losses
① Investing too much capital at once.
② Starting to invest without learning or researching is no different from playing the lottery.
③ Regardless of fluctuations, holding onto a certain cryptocurrency for a long time without action.
④ Investing in cryptocurrencies with extremely low market capitalization (such as a recent fork coin that surged nearly 200%).
⑤ No concept of stop-loss or take-profit.
⑥ Trading too frequently, chasing highs and panic selling.
Three essential tips: How to match short-term and medium to long-term regular investments?
Short-term
Short-term refers to operations over a brief period, buying low and selling high to profit from price differences, characterized by speculation. As long as you combine technical indicators and reference fundamental news, you can get started, but it’s easy to chase highs and panic sell, risking standing idle at the peak.
Suitable for: Individuals with certain technical skills who can spend at least half an hour observing the market every morning, noon, and evening.
Medium to long-term
Engaging in medium to long-term investments does not simply mean buying and ignoring; rather, it involves focusing and diligently analyzing the fundamentals. A strong psychological resilience is necessary in market trends, having a certain perspective on future trends. If your perspective diverges from the trend, it may lead to significant losses.
Suitable for: Individuals who do not have time to monitor the market, enjoy researching and analyzing, have sufficient confidence in the future development of cryptocurrencies, and are willing to understand the underlying technology and development prospects.
Regular investment
Regular investment is a method for long-term average returns, less affected by bull and bear markets. If you have experience with mutual fund regular investments, you should find it easy to understand regular investments in digital currencies, and digital currency returns are higher than funds. As long as you invest a fixed amount at regular intervals, select several cryptocurrencies for your investment portfolio, and set stop-loss and take-profit points, the returns will definitely be significant.
Suitable for: Working individuals interested in digital currencies but lacking time for analysis, who have a fixed amount of spare funds each month.
