In the complex cryptocurrency circle, there are partners on all fronts. Some people have formed a team with a group of computers dedicated to currency processing; some people are looking for partners to open exchanges; some people want IDO within a month after starting a project; some people are participating in the incubation of primary market projects; some people are having a lot of fun in the secondary market. Today, let’s talk about the contracts in the secondary market that are often criticized!
What is a contract? In the cryptocurrency world, it is called a contract. In the financial field, it is called a futures contract. It is a type of derivative. For most people, a contract is a scourge, but for a small number of people, it is a tool to get rich. Why do I say that? First of all, we need to understand the nature of making money with contracts, which is to make a small profit with a big investment.
The essential root of operating contracts
The following factors are worth considering:
1. Thoughts on margin call. Assuming the probability of margin call is 0.1%, the total probability of margin call for 1,000 transactions is 63%, and the probability of margin call for 2,000 transactions is 87%. The probability of margin call is only a theoretical assumption. In actual operation, since the probability of price trends is usually normally distributed, the probability of margin call increases exponentially with the increase of leverage, which means that the probability of margin call with 10x leverage is much greater than the probability of margin call with 5x leverage.
2. Consideration of the fee rate. This includes funding fees and handling fees. We assume that the total fee for each transaction is 0.1%. Assuming there is no profit or loss, after 1,000 transactions, the principal is likely to be zero.
3. Optimistic bias. We often hear that someone made tens of millions with a contract worth a few thousand yuan, and someone made hundreds of percent today; you mistakenly think that the law of compound interest is very useful, and I can do it too. But in real operation, you will find the problem. I will give you an example so that you can understand it more clearly.
Suppose you have 10,000 yuan, you made 50% the first time, and lost 50% the second time, you still have 7,500 yuan left. Suppose you lost 50% the first time, and made 50% the second time, you still have 7,500 yuan left. But suppose you lost 50% the first time, and lost 50% the second time, you need to make 750% profit to get back your money. What does this mean? That is to say, if you want to get back your money, the currency needs to rise or fall by 75% under 10x leverage!
Some friends said, it is difficult! If I adjust the leverage to 30 times, then the currency needs to change 25% in your direction at the current price to recover the investment. You can check the currencies with such large price changes. There are very few. If it does not change in your direction, it only needs 3.3% to cause a liquidation.
4. Profit structure: 10% of retail investors in the spot market can make a profit, and 3% of retail investors in the contract market can make a profit.
There are roughly three types of people who make profits from contracts:
One is to use small funds to make money by winning rate. Strict discipline is required, and you must withdraw the money you make.
The second is to make money by relying on the profit and loss ratio. The winning rate is less than 50%, but the profit is more than the loss. People like Fat Otaku make a lot of money.
The third is to rely on rolling positions. For example, Tony made his fortune from 50,000 dollars to 10 million, his lunch with Dogecoin increased 400 times, there is also a female college student who made 10 million by shorting Luna, and Liang Xi made his fortune from 1,000 yuan to 10 million yuan, all of which were made by rolling positions.
They all have one thing in common, which I think is discipline. Only by strictly following your own trading signals can you make money. Of course, there are many other factors, such as mentality, position management, funds, profit and loss ratio, etc.
What should we do?
1. Strategy and discipline.
To make money, you must first have your own method, and secondly, you must have disciplined execution. This requires us to ask ourselves whether we can be self-disciplined and strictly implement the strategy. If we can do this, and learn the method theory, reflect on our experience, and have backtesting summaries on different varieties and contract transactions at different times, then the probability of making money will be very high. If any of the above is not done, you may lose money, and lose money continuously.
2. Mindset and execution.
The truth in the cryptocurrency circle is that the reason why people with small capital find it difficult to make money is not because of the small capital, but the impatience and greed caused by the small capital.
For example, if the principal is only 100,000 yuan, after a bull market, a person with good skills may earn dozens of times, and a person with average skills may earn 10 times. Then after two bull markets, it is easy to earn tens of millions.
But why can't most people do it? They think that their capital is small, so they frequently make short-term operations, trying to compound interest in a short period of time, but often stop losses or get stuck, making small profits and big losses, and their capital is getting smaller and smaller. Or they are eager for quick results and randomly open high-leverage contracts, imagining that they will get rich overnight, but the result is that they will lose money overnight.
Impatience and greed are the root causes of failure for most retail investors.
Therefore, we must strictly implement our own strategies during the operation. If the strategy is wrong or incomplete, we should recompile it, constantly reflect and summarize, compare data, and do not change the strategy due to any emotional changes during the transaction. In this way, the profit will be great. #币安合约锦标赛
