In fact, spot and contracts are two different trading mechanisms, similar to trading G and Q currencies, each with its advantages and disadvantages. Different trading mechanisms imply different operational methods; you can think of them as using different tools for profit.
1: What is spot trading:
1: Buying spot means the goods belong to you; you can buy as much as your money allows. Even if the price drops significantly, the goods still belong to you, and as the market recovers later, you will still profit.
2: As long as the value of the goods remains, as long as people still recognize it, or even increasingly so, although the duration is uncertain, there is still something to look forward to in the future.
3: For those with a low risk appetite, spot trading does not require high technical skills because what you focus on is its potential for appreciation, and you do not need to pay excessive attention to price fluctuations (this point is somewhat forced, as there are many coins that can go to zero, and even in spot trading, the risk remains very high).
4: You get what you pay for, with a leverage ratio of 1:1. Since spot trading is a one-sided market, it is very reliant on price increases; you either make money from one-sided increases or profit from buying low and selling high. If you don't buy well, you can also get trapped, especially in a bear market, where you may be caught off guard by market manipulators.
5: With so many currencies and a plethora of news, it's hard to discern. The intelligence of project teams when concocting stories and white papers far exceeds the poor seven-second memory of investors. Once you board the pirate ship in a bear market, it's hard to get off. The probability of small coins and air coins going to zero is very high. If you think the risk of contract liquidation is high, what is the difference from a coin that goes to zero in spot trading? It's just like boiling a frog in warm water.
6: Time cost and opportunity cost; many friends in 2018 and 2019 can relate. If you have coins that have dropped over 80%, cutting losses doesn't make much sense. Waiting seems endless, and you can only passively comfort yourself that as long as you still have coins, there’s hope. Even if a coin doesn’t go to zero, if it takes 3-5 years to break even, what was your original intention in trading? If you're trapped at a high price, theoretically, as long as the price rebounds later, you won't lose money. But when you calculate time cost and opportunity cost, the price could be very high. There is too much content in this area, so I won't elaborate further; there are dedicated books available in bookstores.
2: What is a contract:
Contracts are similar to futures. You can bet on both upward and downward movements. They also possess a certain leverage nature. For those who don't understand leverage, let me give you an example: If you only have 1,000 yuan but are very optimistic about a product and believe it will rise, wanting to profit from the appreciation but lacking sufficient funds. The fundamental difference between contracts and spot trading lies here: you can trade high-value products' price movements with a very small amount of capital, but the product does not belong to you; you own only the rights to the price movements of the product. Its nature is very close to futures but without the time delays, making it a real-time trading model.
1: Improve capital utilization: Bitcoin as a leveraged product allows for high returns with a small amount of capital; just use your spare funds to enhance capital utilization.
2: High trading profit, low cost: The currency fluctuates by an average of 100-300 points daily, providing a large profit margin. Additionally, the transaction fees are low.
3: Two-way operation: Contract currencies can be bought long or short, offering flexible mechanisms to profit even when the market is declining.
4: Trading hours: 24-hour trading time daily, no delivery, especially suitable for office workers who can make full use of their spare time for trading.
5: Market transparency: Prices are globally unified with high transparency, and the daily trading volume is enormous, making it difficult for manipulators to exist. It is highly analyzable and suitable for technical analysis.
6: T+0 trading: You can sell on the same day you buy, allowing you to exit immediately when you find the market unfavorable.
Summary:
Under the same investment amount, the risk is the same for both; for example, if you invest 10,000 in both spot and contracts, and buy the same specifications at the same time, the trends will be consistent, and the profit and loss amounts will not differ. However, because contracts have leverage, 10,000 in spot may buy only 10 coins, while in contracts, it may buy 20 coins. If the amount bought differs with the same capital, the risk will naturally vary. Therefore, the final conclusion is that whether in spot or contracts, under equal conditions, the risk is consistent.
So, it's not that contracts are riskier; rather, relatively speaking, with the leverage in contracts, you can buy and sell more currency amounts, increasing the total value traded, which raises the risk while keeping the principal unchanged. However, the number of trades is something you can control. The more you buy, the higher the risk, but on the flip side, the potential returns are also higher because risk and reward coexist. Thus, whether the risk is high depends on how proportional your trading volume is to your capital.
Regarding the issue of risk, think about it: is there anything that carries no risk? Even drinking water can lead to choking. As long as we maintain the right mindset, avoid overtrading, and strictly follow daily market analysis for trades, I believe we can minimize risk to the lowest level! Don't blame the market conditions, don't blame missed opportunities, and don't blame excessive risk; an unstable mindset and limited skills are the root of all problems.
Contracts are not the devil; they are merely a tool. It's like a kitchen knife; when used in the kitchen, it's a utensil. How to use it correctly is what we should focus on and think about. Technical analysis, position management, entry point selection, profit taking and loss cutting, and mindset control are all very important aspects of trading contracts. These determine whether we can use this tool effectively and whether it can bring us substantial profits.
This is the trading experience I want to share with you today. Many times, your doubts lead to lost opportunities for profit; if you don't dare to try boldly, to engage, to understand, how will you know the pros and cons? You can only know what the next step is after you take the first step. A warm cup of tea, a piece of advice, I am both a teacher and a friendly conversationalist.
