Before you start trading contracts, you must learn how to manage your positions and build your own trading system.
The price of the currency has been rising for a while. If you think the price will fall back in the future, you can go short. Then your profit will be the same as above. If it is spot, you can only buy and go up.
What are the advantages of contracts?
1: Small investment for big gain Theoretically, in the field of contracts, as long as you open a high multiple, you can expand small funds countless times. Contracts improve the utilization rate of funds.
In fact, veteran traders will use a small portion of their positions to trade futures in addition to spot trading, but you should not use a particularly high leverage unless your trading system is very mature.
2: Profits faster
If you only trade spot, with an average increase of 10% each time, it will take 7 times to double the principal of 10,000. But if you open a 10x contract, you can double the principal by catching a single increase.
Profit = 10000*10*10%=10000
Therefore, if you identify the right direction and use reasonable leverage to magnify the increase, your assets will suddenly increase dramatically.
3: Hedge against downside risks
Cryptocurrency contract trading can not only go long, but also go short
You hold Bitcoin for the long term and do not want to clear out your assets no matter what, but the bear market continues to fall. We can increase our currency base through contract trading and make money by short selling. Many big guys will short sell to hedge. Simply put, when the market falls, the chips in your hand will shrink, but by short selling we can reduce the chips from the perspective of the gold standard and increase the currency base, and even make money. When you think that the currency price has ended the bear market decline and is about to rise, we can close our positions and hold the spot and wait for the rise.
4: You can do both long and short, convenient and flexible
When the cryptocurrency market is bullish, it seems that everything you buy will go up, but once you enter a bear market, you will find that even if you buy big cakes, you will lose money. Contracts provide a flexible option. Not only can you go long, but you can also go short. Whether the market goes up or down, you can make money regardless of whether it is a bull market or a bear market.
About Risks
1: Risk of liquidation
There is no sure way to make money in the world, especially to make big money and quick money. Contract trading can magnify profits, and many big guys have succeeded and achieved a counterattack. Although many people have been liquidated, it is a gaming market in itself. Your liquidation does not mean that others cannot. You should work harder on your internal skills. Contracts can make quick money, but they also carry a huge risk of liquidation, which is also the biggest risk.
2: Exchange pin
The so-called pin is the technical K-line, where a very thin line appears up or down. This small line in one minute will not affect the spot, but the short contract is different, because the leverage is increased and the amplitude is also increased. 100 times will explode with just 1%.
3: Magnified human nature
Those who have played with contracts may know clearly what it is. They clearly look at the other party's direction, make a trading plan, discipline, stop loss, stop profit, control position, leverage, etc., but forget everything during the intraday trading. They don't execute the stop loss when they should, and choose to hold the order, resulting in a margin call. It is also easy to get carried away with contracts, constantly magnifying desires and leverage multiples. Many people find it difficult to control their own human nature and cannot abide by the trading disciplines. The result is a vicious cycle of continuous margin calls. In fact, the biggest enemy we have to face in trading is our own human nature.
Finally, let’s summarize the difference between the two
Spot VS Contract
The capital threshold for spot trading is high, while the capital threshold for contract trading is low;
Spot trading is more suitable for conservative people, while contracts are more suitable for aggressive people;
The spot market has only one direction, and the contract can go up, down, or sideways.
I'm just expressing my opinion on the contract. Please don't criticize me if you don't agree.
The current liquidity is poor, and the main hot money players are all in the band, so it is more suitable to do contracts, and contracts are more suitable for the current market. I am not a contract god, trading for a living is my current state, and respecting market rules is my daily reminder to myself. I just want to tell you a different perspective on the contract tool. I just make trading a business through my own efforts. $BTC $ETH $SOL
