Basic concepts for novices:

Many novices do not understand what spot, contracts, leverage, long, short, liquidation, liquidation, and liquidation mean in the cryptocurrency circle.

1. Spot: Buy coins directly and sell them when they rise to make money.

2. Contract: Buy derivatives of coins. By judging the future market rise and fall, choose to go long (buy up) or short (buy down) to earn the income from the rise/fall.

3. Leverage: Used in conjunction with contracts to increase the multiple. The more leverage multiples, the more you earn, and it is proportional to the risk. The higher the multiples, the greater the risk, and the lower the multiples, the lower the risk.

4. Go long (long): Buy bullish when you think it will rise later. Income = principal × increase × leverage multiple. Loss = principal × decrease × leverage multiple.

5. Go short (short): Sell bearish when you think it will fall later. Income = principal × decrease × leverage multiple Loss = principal × increase × leverage multiple.

6. Liquidation:

Long liquidation: The principle of long orders is to be bullish on the future market, borrow money to buy first, sell at a high price after the price rises to make a profit, pay back the borrowed funds, and the rest is profit. If a long order encounters a falling market, the loss will be forced to close when it reaches the account margin, and the money in the account will be directly cleared. For example, at a certain price, you think it will rise in the future, so you open a 10x long position, that is, the long money is ten times the margin. Your margin is 10,000 U, and 10x long is equivalent to the exchange lending you 90,000 U first. You use this 100,000 U to open a long position. The price of the currency falls by 10%, which is equivalent to a loss of 10,000 for opening a position of 100,000, and your principal is only 10,000, and the remaining 90,000 is borrowed. In order to prevent you from not being able to pay it back, the exchange will forcibly take back the 90,000 lent to you, and because you have already lost 10,000, there is no money in the account, and it is zero. This is a long liquidation.

Short position explosion: The principle of short position is to be bearish on the future market. First, borrow coins to sell. If the price drops, buy the same coins at a low price and return them to the borrower. The remaining money is the profit. If the short position encounters a rising market, the money previously borrowed to sell is not enough to buy back the same number of coins at a high price. It will be forced to buy back. At this time, the price of the coin is higher than the opening price. Your principal plus the loan can only buy back the same number of coins. After returning the coins, your money is gone. For example, if you short a certain currency at a price of 10,000 U, and your margin is 10,000 U, it is equivalent to the exchange lending you 9 coins worth 90,000 U at this time plus your coin worth 10,000 U, a total of 10 coins. You sell them first, and then buy 9 coins at a low price after the price drops and return them to the exchange.The rest is profit, but if the price rises by 11%, the price of the currency is 11,100 U. The 100,000 U you sold before can only buy 9 coins at this time, but the exchange has borrowed 9 coins from you before. At this time, you can only afford 9 coins at most. In order to prevent the price of the currency from continuing to rise, your account is not enough to buy 9 coins to return. At this time, the exchange will force you to use the money you opened to sell short to buy 9 coins with 100,000 U to recover. At this time, your principal is gone. This is a short position explosion.

7. Position penetration: The market rises and falls too fast. The currency price reaches the explosion price, but because of the rapid fluctuation, it fails to force the position to be closed in time, resulting in the inability to pay back the borrowed money or currency. Not only does the fund explode to zero, but it also owes money to the exchange.

8. Position closing: The act of manually terminating a contract transaction, stop profit/stop loss. Investment is risky, so we must learn to avoid risks.