I have seen many KOLs mention rollover trading while popularizing trading knowledge. I researched a lot of material, most of which is very professional, but I want to write clearly about what rollover actually is and how to do it practically from the perspective of someone who is also learning.
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What is rollover? Simply put:
Rollover = Replace the contract that is about to expire with the contract for the next period.
It's like your rental is about to expire; instead of terminating the lease, you renew it for a new period.
But in the contract market, it's not called 'renewal', it's called 'closing the current position and reopening a long-term contract'.
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Which contracts need to be rolled?
In Binance, contracts are divided into two types:
1. Perpetual contract: No expiration time, no need to roll over.
2. Expiring contract: has an expiration date and settles upon expiration.
So rollover operations are only needed when dealing with expiring contracts.
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Why roll over?
Because I might still be bullish (or bearish) and don’t want to be liquidated by the system after expiration.
For example:
I am trading the quarterly contract BTCUSD 0927. If I want to continue holding, I need to close this contract when it approaches September 27 and switch to the next one (e.g., BTCUSD 1227).
This way, I can continue to hold the position instead of passively closing it.
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How to roll over? The operation is divided into two steps:
1. Close the position in the current contract.
For example, if I have a long position, I will sell at market price (close the position).
2. Open a position in the same direction on the next period's contract.
For instance, if I continue to be bullish, I will open a long position on 'BTCUSD 1227'.
It's best to choose a few days before the expiration date to roll over, as the new contract already has liquidity and the price difference is more stable.
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Points to note for rollover.
Price difference: There may be premiums or discounts between contracts of different periods, so consider the costs.
Fees: One closing + one opening, make sure to calculate the fees clearly.
Liquidity: When a new contract just goes live, the trading volume is small and the slippage is large, so it's best to wait until the volume picks up before rolling over.
Direction judgment: Don't roll in the wrong direction, for example, originally bullish but end up opening a short position.
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My personal little experience:
When I rolled over for the first time, I was confused by the contract code and almost forgot to act on the expiration day.
Now I will set a reminder a week before the expiration date and check the new contract's candlestick patterns and order book to ensure that the swap won't be too outrageous.
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I am not a professional trader; I just record what I understand.
If you have better methods or experiences for rollover, please teach me. 👇
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The crypto circle is not just about bullish and bearish; there is also a space for serious learning.