Here are 15 terms that every newcomer to the cryptocurrency space must understand, essential knowledge for entering the market. Regarding cryptocurrency terminology, newcomers can refer to this.
1. What is Fiat Currency? Fiat currency is legal tender issued by a country and its government, guaranteed solely by government credit, such as RMB, USD, etc. 2. What does Token mean? Token is usually translated as token. Tokens are one of the important concepts in blockchain, and its more widely known name is "currency"; however, in the view of professionals in the "chain circle," it is more accurately translated as "token," representing a kind of rights proof on the blockchain rather than currency. In the traditional value system, only things that can be recorded in a ledger can be exchanged for value and circulated. Therefore, bookkeeping is the basis for generating wealth. However, in the real world, the vast majority of things cannot be quantified, and things that can be recorded in a ledger are extremely limited. However, "Tokens" can. This is magical because Tokens can represent physical assets and virtual digital assets through digital means. 3. What does Airdrop mean? Airdrop is currently a very popular cryptocurrency marketing method. To provide potential investors and enthusiasts with information about tokens, token teams frequently distribute unknown tokens to the accounts of cryptocurrency market participants, in proportion to their existing token holdings. To receive more airdrops, one must purchase more tokens; this is a very effective marketing strategy.
4. What is Candy? Various digital currencies that are newly issued during the ICO phase and are distributed for free to users are a way for the project issuer to create momentum and publicity for the project itself.
5. What does Breaking Issue mean? The issue refers to the issuance price of the cryptocurrency, and breaking issue means that a certain cryptocurrency has fallen below its issuance price. 6. What does Private Placement mean? It is a way to invest in cryptocurrency projects and is the best way for crypto project founders to raise funds for platform operations. Private placement is relative to public offering; in short, it refers to raising funds privately, selling stocks (cryptocurrencies) to a small number of qualified investors without going through the public market to obtain funding.
7. What does ICO mean? Initial Coin Offering, derived from the concept of Initial Public Offering (IPO) in the stock market, is a fundraising behavior where blockchain projects issue their own virtual currencies in exchange for commonly used virtual currencies in the market. 8. What trading platforms are currently available in the crypto space? Binance. 1. Basic characteristics of virtual currency trading: (1) Trading time: 24/7, no market closure throughout the year. (2) No price limits: Virtual currency trading does not have price limit restrictions, while stocks do. For example, on May 28th, Bitcoin's daily increase exceeded 20%. (3) Trading unit: The minimum can be 0.0001 BTC (approximately 0.6 yuan), with no minimum buying limit as in stocks (where a minimum of 100 shares must be bought). (4) Immediate trading: This means T+0; stocks are T+1 trading, meaning if you buy stocks today, you can only sell them on the next trading day. However, virtual currency is T+0 trading, allowing for same-day buying and selling. (5) Withdrawals and conversions have no time restrictions: Withdrawals can be made anytime, with high liquidity.
10. Bullish/Bearish Various news that stimulate price increases are referred to as bullish. Conversely, news that causes the price to decline is known as bearish, such as a trading platform being hacked and losing bitcoins, or negative information from the government. 11. Public Chain/Private Chain/Consortium Chain: A public chain refers to a blockchain where anyone can participate in transactions and have effective confirmations. Most blockchain systems are public chains, such as Bitcoin and Ethereum. Public chains are suitable for universal participation and maintenance in applications like mutual insurance. A private chain refers to a blockchain where write permissions are limited to a specific organization or group. Read permissions can be externally released or restricted to any degree. Developing enterprise-level applications based on private chains helps businesses achieve on-chain operations, and the non-tampering feature of on-chain information helps enhance corporate social credibility and investor confidence. A consortium chain is a blockchain where the consensus mechanism is jointly controlled by several institutions. The credit mechanism is maintained collectively by these institutions. The legality of all transactions must be confirmed by a majority or all institutions before being written into the blockchain as legitimate records. Imagine in the financial industry, a blockchain alliance formed by several socially credible financial institutions, each operating a mining node, representing all participants in exercising consensus rights and maintaining the normal growth and operation of this blockchain. 12. Rebound/Consolidation/Correction: When the price of a cryptocurrency declines but occasionally rises, this is called a rebound, with the rise being smaller than the decline. A correction is the opposite, where temporary declines occur during an overall upward trend. Consolidation refers to a relatively stable price level of the cryptocurrency, with little fluctuation.
13. Leverage Trading: As the name suggests, leverage trading involves using a small amount of capital to invest multiples of the original capital to seek relatively high returns from the fluctuations of the underlying assets, or losses, somewhat similar to gambling. 14. Basic Principles of Virtual Currency Transactions
(1) Market Order: Executes at the current market price, ensuring that the investor's buy and sell instructions are executed in a timely manner, but at the same time, the investor cannot predict the transaction price before placing the market order, which presents a certain degree of uncertainty. Generally, the more volatile the market, the greater the risk of price uncertainty in market orders. (2) Limit Order: Investors can place buy orders below the market price or sell orders above the market price. When the market price hits the set price, the transaction is executed. When the set price diverges significantly from the market price, it may result in failure to execute.
3. Basic Principles of Transactions: The principles of "Price Priority, Time Priority" apply. A higher buying price takes precedence over a lower buying price, and a lower selling price takes precedence over a higher selling price. When the order prices are the same, the earlier placed order takes precedence over the later one.
15. Common Professional Terms Explained During Trading
【Turnover Rate】 Refers to the frequency at which a particular cryptocurrency is bought and sold in the market over a certain period, serving as a primary indicator of the liquidity of that cryptocurrency.
【Market Order】 Refers to buying and selling at the current price; market orders have trading priority. If you can complete a trade faster, you can use a market order.
【Limit Order】 Refers to buying or selling at a specified price, also known as order trading or hanging order trading. 【Wash Trading】 A technique used by market makers. The specific operational method involves opening accounts on multiple exchanges and trading back and forth among them to manipulate coin prices.
【Washing the Market】 This is a means by which market makers manipulate coin prices, intentionally suppressing prices. The specific method is to first raise the price and then profit by selling. During this period, the main force often intentionally places large sell orders to pressure the market, forcing low-priced buyers to sell their cryptocurrencies, thereby reducing the pressure of rising prices through this method.
To make it easy to raise the price. 【Market Support】 When prices are low and sentiment is weak, large holders buy a lot of this coin to prevent its price from continuing to fall. 【Bull Market】 Refers to a market situation where prices are generally rising, maintaining a sustained upward trend, with an optimistic outlook. (In the cryptocurrency space, this is mainly driven by the rise of BTC leading other mainstream coins, such as altcoins.)
【Bear Market】 In contrast to the bull market, it refers to a situation where the market continues to decline, with market sentiment appearing sluggish and a sustained drop. What you are currently experiencing is a bear market. At this stage, the most important thing is for us to survive, and then to take further actions such as accumulating coins and bottom fishing.
【Monkey Market】 I believe many people do not understand this; it exists in the stock market. Why is it called a monkey market? Monkeys like to jump around, which corresponds to our market's volatility. In the monkey market phase, it is not easy to grasp the market trends (mainstream coins may rise today but fall tomorrow, and some altcoins may rise while others may crash).
【Main Uptrend】 Originating from wave theory, it refers to the longest duration wave during a price increase. This is also a common situation in a bull market; if you catch the main uptrend, you will earn a fortune. The opposite is known as the "main downtrend." 【Steady Decline】 The overall trend shows a downward movement, but the movement often rises for two days and then falls one day, constantly giving hope but ultimately disappointing.
【Waterfall】 Refers to a situation where the market suddenly experiences a significant drop, with several large bearish candles appearing in a short time, resembling a waterfall, flowing down, causing viewers pain and heartache. Some people also call it "plummeting." 【Geyser】 The market experiences long-term stagnation due to bearish factors, and when the bearish news is exhausted or becomes bullish, it can lead to a rapid price increase.
Once bearish factors are removed, the market may experience explosive growth. 【Washing the Market】 Large capital groups, such as market makers or project teams, manipulate the market using funds, causing the market to rise and fall, scaring away those who are hesitant, in order to reap high profits.
【Accumulating】 Generally, this is done by washing the market to flush out the retail investors, then the market makers will take over the coins sold by them, increasing their chips to achieve market control (usually accumulating is done at low prices).
【Market Control】 Very simple; if I have a lot of money (a large proportion of coins in circulation), I can easily manipulate the market just by a few moves. The goal is straightforward: to make more money and trap retail investors. 【Cutting Retail Investors】 A portion of traders lose money and exit, while another portion of newcomers enters, just like harvesting leeks, cutting them down time and again. The happiest ones are the market makers.
【Fake Signals】 The market makers use candlesticks to create upward or downward trends, leading us to buy or sell to achieve their goal of cutting retail investors.
【Bullish】 Also referred to as bullish news. Mainly utilizes news events, generally indicating good news. In the eyes of most people, bullish news will definitely lead to price increases; however, this is not always the case, as bullish and bearish news does not have a proportional relationship with price movements, but only has a certain influence that can stimulate market movement. 【Bearish】 Also refers to unfavorable news. However, there is also a saying in the market: when bearish news is exhausted, it often becomes bullish.
【Pump and Dump】 The cryptocurrency price has been consolidating for a long time, and the possibility of a decline is relatively high. Most bears have sold their virtual currencies, and suddenly the bears raise the price to lure the bulls into thinking that the price will rise, leading them to buy in, only for the bears to suppress the price and trap the bulls. 【Short Squeeze】 After the bulls buy the cryptocurrency, they intentionally suppress the price, making the bears think the price will drop, leading them to sell, resulting in a trap for the bulls.
【Position】 This is very simple; it refers to the ratio of your account funds to the funds you use to buy coins. 【Full Position】 All account funds are converted into coins. What you often refer to as "fully invested" or "all in" is a full position. 【Averaging Down】 For example, if you hold BTC and it drops, you buy a portion of BTC to lower your cost. 【Adding to Position】 You hold BTC, are optimistic about its development, and buy more BTC during its upward movement. 【Building Position】
Referred to as opening a position. It indicates that account funds are used to buy a certain quantity of a coin. 【Reducing Position】 Selling part of the coins held in anticipation of future market risks. 【Locking Position】 Those engaging in futures leverage should know this. It is very simple: if you are trading EOS futures leverage, and you bought a long position of 10,000, then opened a short position of 10,000. Think carefully about your position. 【Flat Position】 Not trading; just watching. In the crypto space, this can be understood as having only USDT in the account, with no other coins. 【Light Position】 The funds used to buy coins account for a small proportion of the total funds. 【Heavy Position】 The funds used to buy coins account for a large proportion of the total funds. 【Half Position】 The funds used to buy coins account for half of the total funds. 【Clearing Position】 Not playing anymore; sold all coins and prepared to watch with a flat position.
【Take Profit】 After achieving a certain profit, sell all virtual currencies to secure the profit. 【Stop Loss】 After losing to a certain degree, sell all held virtual currencies to prevent further losses. 【Consolidation】 The market fluctuates little, with rises and falls occurring within a range.
【Rebound】 The price of the cryptocurrency is on a downward path, receiving support from technical aspects or capital involvement, causing the market to turn from decline to rise. 【Reversal】 The price drops to a bottom, with no further decline, turning from a downward trend to an upward trend. Commonly seen is the "V-shaped reversal." A rebound is the basis for a reversal, and the extent of a reversal is far greater than that of a rebound. 【Arbitrage】 Simply put, it involves identifying price differences between platforms and earning from those differences. A key point to note about arbitrage is the speed of transferring coins, as sometimes the speed can impact your earnings. 【OTC Trading】 Many platforms also refer to it as fiat trading. The platform provides guarantees, allowing merchants or individuals to directly trade with RMB to buy or sell mainstream coins or USDT in their possession. The trading is similar to an online shopping platform (you know what I mean). 【Cut Loss】 More politely referred to as "liquidation." Some of you often do this; when prices drop, you sell out of fear that they will drop further. 【Trapped】 When you buy coins and the price declines, and you can't bear to sell, congratulations, you are trapped. 【Untrapping】 If the coins you bought dropped and you felt distressed, but after some time they went back up, you are untrapped, and you feel happy again. 【Missing Out】 When the market is not good, you buy. When the market rises, you hesitate. This perfect miss is called missing out. 【Roller Coaster】 When the coins you bought rise, you feel elated and brag to your friends, only for them to drop again a few days later. It feels like riding a roller coaster, just a thrill without further outcomes.
【HODLing】 If you are optimistic about the future development of a coin and want to make tenfold, hundredfold, or thousandfold returns to achieve financial freedom, then you should accumulate it extensively.
Buying this coin, waiting. 【Going Long】 Also known as "Bullish," buyers believe that the price of the coin will rise in the future, buying coins to sell at a high price when the price rises. 【Going Short】 Also known as "Bearish," the opposite of bullish; sellers believe that the price of the coin will decline in the future and sell the coins they hold (or borrow from the trading platform) to buy back at a lower price to profit.
【Mining】 The process of using computers, mobile phones, and other devices to run computational programs to obtain digital currencies. Note: Mining may shorten the lifespan of the equipment.
【ICO】 Initial Coin Offering, derived from the concept of Initial Public Offering (IPO) in the stock market, is a fundraising behavior where blockchain projects issue their own virtual currency in exchange for commonly used virtual currencies in the market. 【Private Placement】 refers to fundraising that targets a specific small group of qualified investors rather than the general public, which is the behavior of raising funds privately.
Divide the principal into ten parts, 1,000 each.
Using 1,000 yuan to trade contracts can quickly accumulate to 100,000 yuan! (It takes approximately 1 to 3 months.) In the cryptocurrency space, 1,000 yuan is roughly 140 USDT!
Optimal Strategy Recommendation: Contracts
Every time I use 30 USDT to speculate on hot coins, making sure to set take-profit and stop-loss at 100 to earn 200, then 200 doubles to 400, and 400 doubles to 800. Remember, at most three times! Because there is a bit of luck in the crypto space, every time I do this speculation, I can easily win 9 times, but once I blow up! If I successfully pass three rounds with 100, then my capital would rise to 1,100 USDT!
At this time, I recommend using a triple strategy to play.
In one day, engage in two types of orders: ultra-short-term orders and strategic orders. If opportunities arise, enter trend orders. Ultra-short-term orders are used for quick strikes, targeting 15-minute levels. Advantages: High returns. Disadvantages: High risk. Only do major coins and high-volatility coins.
The second type of order is the strategic order, which uses small positions (for example, 10x or 15 USDT) to trade contracts at around the four-hour level and accumulate profits weekly.
The third type is the trend order, which is a medium to long-term trade. When you identify the right trend, you directly enter with the advantage of setting a relatively favorable risk-to-reward ratio.
Newcomers entering the cryptocurrency space will encounter common mistakes, pure dry goods; take your time to read! Contract Leverage+
1: Some newcomers still do not understand what contract leverage is, thinking that 100 times the risk is definitely higher than 1 time. In fact, they are the same. Take the exchange I use as an example; opening a 1x contract and a 100x contract yields the same floating profit and loss. The level of risk depends on your judgment of the trend, your entry point, and importantly, your position management. 2: So how should one choose the leverage ratio? Personally, I prefer 100x leverage; in the exchange I use, 100x allows for more contracts than 1x, meaning the margin requirement is much lower. If the trend is correct but my entry point is poor, I can average down to turn losses into profits. Averaging down is for better profitability, not to increase my risk exposure.
2. Averaging Down and Position Management
As mentioned above, averaging down is for better profitability, not to increase your risk. Many new friends may not know how to average down and how much to average down. I usually choose to average down at resistance and support levels, not just averaging down by one times, but by two or three times to achieve quick profits and thus reduce risk. As for position management, I will share my own experience: I generally enter at 25% of my position or less, regardless of how strong the trend is. I never enter with 50% or 100% of my position. The reason is well known; the more you enter, the greater the risk, and the closer you are to the liquidation price, making it inevitable to face poor positions or sudden market spikes, so this way can better control risks. 3. Take-Profit and Stop-Loss Against the Trend
Those who can make money are not necessarily veterans; those who can cut losses are the real veterans. Everyone understands this, but few can do it. Newcomers must develop good habits of setting take-profit and stop-loss orders. Don't be too greedy with profits, lest a profitable order turns into a loss. For example, if I am bullish this hour, I will go long near the support level. After making a profit, I will consider exiting part of it and leave some to continue rolling. Once I find the trend is not right, and it approaches the resistance level but cannot break above, then I will exit entirely. Personally, I think stop-loss is more important than take-profit; if the trend is not right, whether at the top or bottom, one must switch from long to short or vice versa. Remember to cut losses when necessary. Do not resist the trend; otherwise, if the market moves unilaterally, the losses will only increase until liquidation occurs. It’s best to place stop-loss orders near support or resistance levels. Observe the market and your risk tolerance to determine which cycle's support or resistance levels are appropriate. There’s nothing impossible in this space; you should know this upon entering. So remember, be cautious. Money earned through luck will gradually be lost through skill.
3. Support and Resistance Levels
The concepts of support and resistance levels have been mentioned multiple times before, and many friends may not understand them. The support level is where the price has fallen to multiple times without breaking down further, and it begins to rebound. The resistance level is where the price has risen to multiple times but cannot go higher, leading to a decline. So how should we view support and resistance levels? Actually, the support and resistance levels vary for each cycle. By connecting the highest and lowest points, we can see them. The larger the cycle, the higher the reference value.
4. Frequent Trading
Many novice friends will experience this: frequently trading, switching between long and short positions, often leading to losses on both sides, or after deducting fees, ending up with nothing. This bad habit must be changed; remember, trading is not lacking in opportunities—there are daily opportunities at all times. There is no need to rush for a moment; not every opportunity can be seized, and not every opportunity can be acted upon. It’s not about the quantity of trades but their quality. Controlling your hands well will prevent easily losing the profits you've made. Bottom Fishing Rule: When a strong cryptocurrency falls for nine consecutive days at a high level, this is likely an excellent bottom fishing signal. At this point, do not hesitate; act decisively. Such consecutive declines often lead to genuine investment opportunities, known as golden pits. A significant market correction can sometimes be a great opportunity to acquire low-cost chips, seizing such opportunities lays the groundwork for future wealth growth. Take-Profit Rule: If the cryptocurrency you hold has risen for two consecutive days, you must consider reducing your position to lock in profits. In this market, it is unpredictable, and there are no myths of perpetual increases.
Rally Signal: When a cryptocurrency experiences a 7% increase, this is merely the beginning of the market movement. Generally, the next day the cryptocurrency will continue to rise due to inertia. Therefore, investors should closely monitor the market and refrain from rushing to exit. Patiently wait for further price increases to gain larger returns.
Trend Password: For those coins with long-term upward potential, the end of a correction is the best entry point. In cryptocurrency investments, it is crucial to refuse blind chasing of rising prices and selling falling prices. Patience is key; wait for the market to correct appropriately and enter according to the trend, like waiting for the wind to come, making it easy to ride the wave of wealth growth.
Market Change Warning: If a cryptocurrency's price remains flat for three days, further observation is needed. If the stagnation continues for six days without a breakout, investors should decisively choose to change positions and avoid being stubborn. Prolonged stagnation without a breakout often indicates that the market is about to change, timely adjustment of investment direction can effectively evade risks. Stop-Loss Iron Rule: If the cryptocurrency bought does not earn back the cost the following day, one should immediately liquidate and exit. In investment, stop-loss should be firm and decisive. Once you realize the investment direction is wrong, act quickly to cut losses. Hesitation often leads to greater losses; strictly executing stop-loss strategies is essential to preserve strength in the market.
Consecutive Rise Law: When a cryptocurrency rises for three consecutive days, it often indicates that a five-day uptrend may follow. On the fifth day, investors should take profits. In the crypto space, knowing when to sell is key to investment success. Accurately grasping the timing of sales can maximize profits.
Volume and Price Bible: When a cryptocurrency appears to break through with increased volume at a low level, this is a clear entry signal. The increase in trading volume indicates active capital involvement in the market, and prices are expected to continue rising. Conversely, if there is a phenomenon of increased volume and stagnation at a high level, this is a strong alert to escape the peak. At this time, investors should decisively exit to avoid falling into the trap of price declines. Moving Average Strategy: In technical analysis, the 3-day line can be used to judge short-term trends, the 30-day line helps observe mid-term trends, the 80-day line is often related to main upward waves, and the 120-day line can serve as a reference for long-term investment. Investors should choose cryptocurrencies with upward trends in their moving averages for investment, follow the trend, achieve steady profits, and avoid fatigue and risks caused by frequent operations. Counterattack Mindset: Even with a small amount of capital, it is possible to achieve considerable returns in the cryptocurrency space. The key is to resist the interference of FOMO (fear of missing out) and strictly adhere to trading discipline. Persistently learn and practice every day, allowing yourself to improve by 1% in investment knowledge and skills, creating miraculous wealth growth through the power of compound interest.
I am a fanatic, having experienced multiple rounds of bull and bear markets, possessing rich market experience in various financial fields. Follow my public account (Fanatic Talks Trends) to penetrate the fog of information and discover the real market. Grasp more opportunities for wealth creation and discover truly valuable opportunities; don't miss out and regret it!
Guide to Preventing Liquidation in Contracts
Implement good risk control. Contract trading is a high-risk investment behavior. Before engaging in contract trading, you need to devise a detailed risk control plan.
Capital Management. Rational capital management/allocation can effectively reduce risk and avoid contract liquidation. Control leverage ratios. Controlling leverage ratios is one of the important methods to avoid contract liquidation. Timely stop-loss. Stop-loss is more difficult than take-profit.
What is Contract Liquidation?
This refers to a situation in contract trading where market price changes too rapidly or significantly, causing the user's account margin to fall below the level needed to maintain their original contract position, resulting in forced liquidation and loss. The principle of contract positions can be represented by the following formula: Margin Rate = (Account Equity + Unrealized Profit and Loss) / (Contract Value * Leverage Ratio). When the margin rate falls below the maintenance margin rate, the forced liquidation mechanism is triggered, meaning the platform will automatically liquidate all contract positions at the best market price, deducting the corresponding handling fees and funding rates. If market prices fluctuate significantly, resulting in the liquidation price falling below the bankruptcy price (the price when account equity is zero), liquidation losses occur, meaning the user not only loses all margin but may also need to compensate the platform or other users for losses. Why is liquidation so easy?
The fundamental reason for liquidation in contracts is that market price changes exceed the user's expectations and capacity to bear, resulting in insufficient margin to support the contract position. Due to the leverage effect, the risk of contract trading is very high. When prices move against you, you need to close your position in a timely manner to prevent losses from further expanding. If you do not close your position in time, your margin will gradually decrease until it eventually reaches the liquidation line. If your margin falls below the liquidation line, your position will be forcibly closed, and all funds will be liquidated. Specifically, there are several common situations:
Overleveraged: Some users pursue higher returns by choosing a higher leverage ratio or a larger position size, resulting in a low margin ratio and significant risk exposure. Once the market experiences adverse fluctuations, it can easily trigger margin calls. No Stop-Loss: Some users avoid frequent stop-losses or missing rebound opportunities by choosing not to set stop-losses or by setting loose stop-loss conditions, making it difficult to control losses in a timely manner. In extreme market fluctuations, this can easily lead to liquidation. Denial of Mistakes: Some users, when faced with adverse market fluctuations, refuse to admit their judgment was wrong due to self-denial or consolation and continue to hold or add to their positions, resulting in continuously expanding losses. In extreme market fluctuations, this can easily lead to liquidation.
How to avoid liquidation?
Control Leverage
So, how much leverage can you use before liquidation occurs? The answer is: it depends on your leverage ratio and margin level. For example, if you use $10,000 with a 5x leverage to buy $50,000 worth of Bitcoin, that means you have contributed 20% margin; if Bitcoin rises by 20% the next day, the value of your Bitcoin holdings will change to $60,000, earning you $10,000. However, your principal is only $10,000, meaning you have a 100% return. Conversely, if Bitcoin drops by 20%, you will lose $10,000, effectively wiping out your principal. If losses continue, the platform will need to recover the borrowed funds, which is why they will forcibly sell your Bitcoin, recovering the borrowed money and interest, leading to forced liquidation. This means your money is gone, and you won’t even get a chance to wait for it to recover, resulting in complete liquidation. In fact, for novice users participating in contract trading for the first time, when opening a position, they should choose a suitable leverage ratio and position size based on their capital situation and risk tolerance, avoiding excessive greed or fear. As a general rule, the margin ratio should be maintained above 10%, and the leverage ratio should be kept below 10. Setting stop-losses
Controlling reasonable leverage can avoid liquidation risk to some extent, but the crypto market has high volatility characteristics. Even if leverage ratios are controlled, one could still be shaken out by significant market fluctuations. Therefore, under the premise of reasonably controlling positions, we also need to set stop-loss points/lines.
Stop-loss can be viewed as part of the exit strategy for each trade you make. These orders will be executed once the price reaches a predetermined level, closing your long or short position to minimize losses. Whether you like to use candlestick charts, trend lines, or technical indicators for trading, stop-loss means you don't have to worry about exiting trades or second-guessing your decisions afterward. For example, a trader establishing a long position based on an ascending triangle can quickly determine where to set the stop-loss. The height of the triangle's axis can generate a potential target, while the slant of the shape indicates an invalidation point.
I strongly recommend that for every contract trade, it is best to set a stop-loss/exit point because no one knows what will happen in the cryptocurrency market on any given day. Therefore, stop-loss helps protect you from unknown situations and better understand the expectations of each position you open. Setting stop-loss in Bitget is very simple. Enter the 【Contract】 section, check the 【Take Profit/Stop Loss】 option, and you can enter the 【Stop Loss】 price. Bitget's contract trading allows for up to 20 stop-loss orders to efficiently protect the principal of your contract account. Suppose you purchased BTCUSDT contracts at a price of $10,000 on Bitget. To minimize potential losses from this trade, you can set a stop-loss order at 20% below the purchase price (i.e., $8,000). If the price of BTCUSDT drops below $8,000, your stop-loss order will be triggered. The trading platform will then sell the contract at the current market price, which could be exactly $8,000 at the trigger price, or significantly lower, depending on current market conditions. It should be noted that stop-loss is not a fail-safe method to prevent forced liquidation; in the crypto market, the liquidation price may fluctuate, and setting stop-loss can only guarantee a reduced risk of liquidation but cannot avoid forced liquidation situations. For novice users, this may be the only "unfriendly" aspect, so before starting contract trading, one must clearly define the maximum loss amount they can accept. The most straightforward approach is to set the "investment amount = maximum stop-loss amount"; that is, after assessing your maximum potential loss amount, use that number as the basis for your trading actions. Capital management
It is well known that capital management is a method of adjusting position sizes to reduce risk while maximizing the growth potential of a trading account. This strategy limits the capital of any given trade to a certain percentage of the account value. For beginners, a ratio of 5%-10% is relatively reasonable. The dollar value within this range will rise or fall with changes in account value and ensure that you do not excessively expose your entire account to any one position.
Due to the unpredictability and volatility of cryptocurrencies, when investing in perpetual futures contracts and other high-leverage derivatives, you might lose your entire investment principal within minutes. Therefore, investors should adhere to stricter limits; the rule of thumb when trading volatile assets is to risk only 5% or no more than 10% of your capital in any single trade.
For example, suppose you have 10,000 USDT in your Bitget contract account. In this case, you will allocate 500-1,000 USDT of risk per trade. If problems arise in the trade, you will only lose 5% or 10% of your account funds. Good risk management means having the right position size, knowing how to set and move stop-losses, and considering the risk/reward ratio. A robust capital management plan allows you to build a portfolio that won't keep you up at night.
It should be noted that while capital management can reduce your risk, do not overtrade. Overtrading occurs when you have too many open positions or risk an unproportional amount of capital in a single trade, putting your entire portfolio at excessive risk. To avoid overtrading, you must adhere to your trading plan and maintain discipline in your pre-planned strategies. Most trading novices become notorious for overtrading, often due to an inability to control emotions like greed, fear, and excitement. While traders can earn significant profits by opening many positions, losses can be equally devastating. A prudent approach to limit losses on all positions is to set an upper limit on the amount of capital you are willing to risk at any given time. For instance, if you have 25 contract trades simultaneously, even if each contract's risk amount is 1%, (almost anything can happen in the cryptocurrency market), all 25 trades could simultaneously move against you, resulting in a substantial loss of 25% of your portfolio.
In addition to the risk of each trade, you should also consider the cumulative risk across your entire portfolio, also known as total risk capital. As a general rule, your total risk capital should be less than 10% of your portfolio. This means if your risk per trade is 1% of your portfolio, the maximum number of open contracts should be 10. In conclusion
In contract trading, the risk of liquidation is a problem that every investor faces, so investors should learn how to avoid liquidation. The reasonable setting of leverage ratios, stop-loss points, and money management to reduce risk are effective risk control measures that can help investors achieve more stable returns in contract trading. At the same time, before conducting contract trading, it is advisable for investors to understand the Bitget platform's rules, market trends, and other relevant information to make accurate market predictions. A rose given is a fragrance left in hand; thank you for your likes, follows, and shares! Wishing everyone financial freedom by 2025! Playing in the cryptocurrency space is ultimately a contest between retail investors and institutional investors. If you don't have cutting-edge news or first-hand information, you can only be cut down! For those who want to layout together,
If you want to join me in harvesting the market makers, you can follow me.