1. Basics of contract algorithms
For many newcomers to the crypto space, the algorithms of contracts can often be confusing. But don't worry, next, we will delve into the analysis of contract algorithms and strategies to help you understand comprehensively.
Calculating target percentage
The method to calculate the target percentage is the ratio of the target price to the opening price minus 1. For example, (1200 ÷ 1000) - 1 = 0.2, or 20%. This means that if you go long at the 1000 level, the price needs to rise to 1200, and the increase in this range is 20%. 00 ÷ 1000 - 1 = -0.2, which means that if you go short at the 1000 level, the price needs to fall to 800, and the decrease in this range is 20%.
Calculating with known leverage ratio
Liquidation point (expressed as a percentage) = 1 ÷ Leverage multiple. In other words, if the reverse fluctuation exceeds this percentage, it may lead to liquidation. Please note that the 'reverse fluctuation' here refers to the degree of price movement contrary to expectations. For example, ÷ 20 = 0.05, which means that when you use 20x leverage, if the market price's reverse fluctuation exceeds 5%, it may trigger liquidation.
Calculating with known stop-loss percentage
Leverage multiple = 1 ÷ Stop-loss percentage. This is a simple mathematical relationship used to determine the required leverage for a given stop-loss percentage. For example, if the stop-loss percentage is set at 0.1, meaning a reverse fluctuation of 10%, then according to the formula above, the required leverage would be 1 ÷ 0.1 = 10x.
Calculating with known opening price and stop-loss price
The formula for calculating leverage is 1 divided by (1 minus the stop-loss price divided by the opening price). This formula can be used to calculate the required leverage to cause liquidation given an opening price and a stop-loss price. Here, the 'opening price' refers to the price at which the investor buys or sells, and the 'stop-loss price' is the pre-set stop-loss point, which automatically closes the investment to prevent further losses when the price reaches that point. For example, if the opening price is 20000 and the stop-loss price is set at 15000, then based on the formula, the required leverage would be 4.
2. Coin-based profit
In coin-based trading, an investor's returns can be calculated using the following formula.
Long position returns in coin-based terms
The returns from going long in coin-based terms are calculated through principal, leverage, and increase, and multiplied by (1 + increase). Explanation: When investors engage in coin-based trading, their returns can be calculated using the above formula. Here, the principal represents the funds invested by the investor, the leverage is derived from the opening and stop-loss prices, and the increase reflects the changes in asset price. By multiplying these three factors and adding a coefficient (1 + increase), the expected returns from going long in coin-based terms can be obtained.
For example, if your principal is 1000 and you go long with 50x leverage, if the asset price rises by 10%, then the profit would be 1000 × 50 × 0.1 × (1 + 0.1) = 5500.
Short position returns in coin-based terms
The profit formula for shorting in coin-based trading is similar to shorting, involving principal, leverage, and decrease in price. Explanation: The calculation formula for shorting coin-based returns is principal × leverage × decrease in price × (1 - decrease in price). Here, the decrease reflects the decline in the asset price. Through this formula, investors can estimate the potential returns from shorting in coin-based trading.
For example, if your principal is 1000 and you go short with 50x leverage, and the asset price drops by 10%, then the profit would be 1000 × 50 × 0.1 × (1 - 0.1) = 4500.
3. U-based profit calculation
The calculation formula for U-based returns is the principal multiplied by the leverage multiplied by the increase or decrease in asset price. Through this formula, investors can easily estimate the profit situation in U-based trading. For example, suppose you invest 1000 yuan, using 50x leverage for U-based long positions, and the asset price rises by 2%. According to the U-based profit calculation formula, your profit will be: 1000 yuan multiplied by 50x leverage multiplied by 2% increase, which equals 1000 yuan.
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