While trading futures is high risk and you should research carefully before participating, risk management is an important part of ensuring the safety of your investment when participating in any form of trading. any transaction, especially Futures trading. Here are some ways you can apply:
Research thoroughly: Before participating in futures trading, research the market, clearly understand the type of contract you want to trade and the influencing factors.
Determine profit and loss goals: Set specific profit and loss goals before opening a position. This helps you manage better and avoid getting caught up in your emotions.
Use stop-loss orders: Set a stop-loss order to automatically sell the contract when the price moves against you. This helps minimize losses in case the market does not develop as predicted.
Diversify position: Do not place all capital in one type of contract. Position dispersion helps minimize risk.
Understanding margin and leverage: Futures often use margin, allowing you to trade with capital that exceeds the amount of money you have. However, using leverage requires caution, because it can increase risks.
Monitor the market and news: Monitor regularly to detect fluctuations and news that can affect the market early.
Risk control tools available in the Futures market:
TP/SL (Take Profit/Stop Loss) orders in futures trading are a way for you to set conditions for taking profits or cutting losses. Let's find out the details:
1.Place a TP/SL Limit Order (Strategy Order):
When you place a Limit order, you can simultaneously set a Take Profit order and a Stop Loss order.
Click [Limit], enter price and order volume, then check the box next to [TP/SL].
TP/SL orders will automatically execute when the market price reaches the trigger price.
You can customize TP/SL prices based on recent prices or tick prices.
2. Command types that support TP/SL function:
The TP/SL function supports Limit, Market, Stop Limit, Stop Market and Post Only orders (except Trailing Stop orders).
Binance Futures supports two types of strategies: One-Triggers-a-One-Cancels-the-Other (OTOCO) and One-Triggers-the-Other (OTO).
In an OTOCO order, if the main order is filled or partially filled, the secondary order (TP or SL) will take effect. If the TP order is matched, the SL order will be canceled and vice versa.
3.Increase or decrease position with TP/SL trigger closing all positions:
All positions will be closed after increasing or decreasing the position. View orders in [Open orders] - [Close position].
4. Set multiple TP/SL for the order:
You can set multiple take profit and stop loss orders for each Long or Short position.
Note that TP/SL orders will be executed in the set order until their cumulative size meets the same size as the primary position.
5. View unmatched TP/SL:
You can click [View] in the [TP/SL] section on the main order to view unmatched TP/SL.
The Stop Market order in futures trading is similar to the Stop Limit order, using the stop price to trigger the transaction. This is an order to close the position at market price immediately when you need to take profit immediately or cut loss immediately instead of waiting for TP/SL Limit order matching.
There is also a Trailing Stop order in Futures trading, which is a useful tool to help you manage risk and protect profits.
For example, when you place a LONG order and set a Trailing Stop of 2%, when the price increases more than 2% compared to the initial price, the Trailing Stop order will follow the market price when the market moves in your favor and if the price the market moves in the opposite direction and falls below the Trailing Stop price, a sell order will be activated and the trade will be closed.
Those are technical theories that you need to research and understand carefully before participating in risky Futures trading. In fact, when participating in futures trading, you are susceptible to FOMO and lead to losses.
How to avoid FOMO when trading?
Always maintain discipline in every investment to avoid FOMO (short for "Fear of Missing Out"): is a popular psychological concept in the field of investment and finance. It refers to a feeling of anxiety or urgency when you believe you are missing out on an important opportunity, experience or event that could make your life better.
When the market is growing and you feel the need to invest so as not to miss out on profit opportunities, FOMO can lead to hasty investment decisions, causing financial risks. To avoid FOMO, always do thorough research before making investment decisions and use stop-loss orders to manage risk.
Also you may see the term Cool down in futures trading, this is not an official term, but there are several concepts related to risk management and trading strategy optimization. Here are some related aspects:
Automatic deleveraging (ADL): This is a forced liquidation mechanism applied when harsh or force majeure market conditions lead to insufficient or rapidly decreasing risk funds. ADL helps control the overall risk of the platform.
Develop your trading method: Each trader has a “unique” way of trading with its own methodology, risk limits and time frames. All successful traders usually prepare themselves with a method for analyzing the markets - from day trading to long-term trading. Determine for yourself a specific and clear trading method.
Risk management: Set specific profit and loss targets before opening a position. Use stop-loss orders to automatically sell contracts when the price moves against you. This helps minimize losses in case the market does not develop as predicted.
This article is for reference only for research before participating in Futures trading. Good luck.