Can the cryptocurrency market really be played? Can contracts be traded?
Many newcomers are full of interest in contracts but cannot understand the rules or risk control, and they get hit hard by the market right away.
Today, I will explain clearly what contracts are, how to trade them, and how to avoid liquidation in the most practical way.
1. What is a contract?
In summary:
You do not need to actually hold the cryptocurrency; as long as the direction is correct, you can make money; if the direction is wrong, you will lose money.
You think it will go up → Go long
You think it will go down → Go short
The essence is to trade price fluctuations, not to hold assets.
2. Two types of contracts
1. Perpetual contract
No expiration date, can be held indefinitely.
Longs and shorts pay each other through funding rates.
Most commonly used in the market.
2. Futures contract
Has a fixed expiration date (current season/next season).
Settled in cash (or physical delivery) at expiration.
3. Core concepts that must be mastered
1. Leverage
Magnifies profits but also magnifies losses.
10x leverage = a 10% drop may lead directly to liquidation.
2. Contract size
Different cryptocurrency pairs have different minimum trading units.
3. Opening/closing positions
Buying to go long = bullish
Selling to go short = bearish
Closing position = ending the trade, locking in gains and losses.
4. Forced liquidation
When margin is insufficient, the system will automatically close positions to prevent you from losing your entire investment.
4. Risk control is the lifeline for newcomers
1. Leverage ≤ 5x
Higher leverage leads to quicker losses.
10x drop of 10% will lead to liquidation, while 5x must drop 20% to trigger liquidation.
2. Single trade loss ≤ 3% of capital
For example, if you have 100,000 capital:
The maximum loss per trade is 3,000.
If you make three consecutive wrong trades, your capital will still be 91%, allowing you to continue trading.
3. Try to trade mainstream cryptocurrencies (BTC / ETH)
Manipulation costs are high.
Fluctuations are healthier.
Less likely to experience “spikes.”
Smaller coins may look appealing, but in practice, they can be deadly.
4. Newcomers should try to trade during regular hours (9:00–18:00)
3 AM is a peak time for liquidations; drastic fluctuations often lack logic.
The last heartfelt piece of advice:
Contracts can indeed make quick money, but to make money in the long term, it's not about luck; it's about:
Direction + Discipline + Risk Control.
✔ First, learn to avoid losses.
✔ Then, learn to make money.
✔ Start with a demo account.
✔ Then, trade with small funds.
✘ No gambling, no emotional trading.
Only those who can maintain their rhythm can go further on this path.
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