Contract trading in the cryptocurrency world requires traders to have a stable mentality and prudent strategies. In addition, the contract product mechanism is very complex, and there are various unprecedented concepts, so it is not friendly to novices. Let's take a look at the beginner's guide to contract trading.

1. Tips for making steady profits from contract trading

1. Analyze the market

There are unilateral and volatile markets in the cryptocurrency market. Generally, unilateral market only occurs within a period of time, and the cryptocurrency market has a unilateral rise or fall. This kind of market is the best to trade. Investors only need to do more on dips or short on rallies. In a directionless market, it is not suitable for medium and long-term trading. You can only trade short-term, sell high and buy low, and run when you make a profit.

2. Analyze trends

The second step is to look at the trend. You can refer to the daily K-line, weekly K-line or monthly K-line, and analyze the long-term factors that affect the mainstream currency, so as to judge whether the mainstream currency will rise or fall in a period of time. If you do not look at the trend before entering the market, and blindly chase the rise and fall, you can only leave the market dismally. After the trend is judged, it is better to set a rough operation goal. It can be said that judging the trend well is half right.

3. Look at the position

Even if the trend is good, you can't rush into the market. You should choose a good point first, otherwise it is easy to be squeezed out by the market. For example, the cryptocurrency market has been on the rise recently, but many people who are long still lose money. Why? It's because the entry point is not chosen well.

4. Choose the right time

The cryptocurrency market has its own rules. Generally, January to May of each year is the rising season, and you can buy on dips. From May to September, the market fluctuates downward, with a certain increase in the middle, so you can buy low and sell high. The second half of the year is mostly a big drop or a big rise, and it is also the most profitable period

5. Control your position

Because only by properly controlling your positions can you have a chance to make stable profits, otherwise, your account will only fail. Generally, 10% of your funds will be invested in the market. If your account funds are only 10,000 US dollars, then each time you enter an order, it is 1,000 US dollars, whether it is long or short. In the case of good market conditions, if the entry order is profitable, the stop loss position is the opening price. No matter how sure you are of the market, the position should not be too heavy. If the entry order is losing money, do not increase the position against the market, unless you have tens of billions of funds to support it. Similarly, for a 5,000 US dollar account, it is best to make 500 orders.

2. Beginner's Guide to Contract Trading

1. Choice of leverage ratio

Because contracts are so exciting and can fully unleash people's gambling nature, many people, especially new investors, open bets at 50 times or 100 times. When you have a small amount of capital, it is no problem to make a small bet for a big gain, but if the capital is large, the risk-return ratio of opening a high leverage is very poor.

Of course, each user can customize a reasonable leverage ratio and margin ratio according to their own risk preferences. What I am talking about below is just my personal operating habits:

A leverage ratio of 5-10 times or less is more appropriate, and the margin occupied by the opened position should not exceed 80% of the available funds (this is because you can leave a little margin and add margin to hold the order).

Too high leverage will increase the risk of liquidation, and too low margin available for additional investment will also lead to the threat of forced liquidation. Choose different parameters according to the volatility of different currencies, such as BTC, 20 times leverage and 20% margin are moderate, ETH, 20 times leverage and 20% margin are relatively safe.

This requires traders to have a certain understanding of the volatility of the currency and to frequently watch the market to develop a sense of the market. For example, in a bear market, the intraday volatility of BTC is usually no more than 2%, while other mainstream currencies may reach 5-10%. This means that when playing contracts of other mainstream currencies, you need to add enough margin and reduce the leverage ratio to avoid liquidation.

2. Repeatedly confirm key support and resistance levels

Bollinger Bands

Bollinger Bands are composed of three lines: the upper line, the middle line and the lower line. The middle line is a 20-period (daily line means 20-day moving average) simple moving average (SMA). The upper and lower lines are drawn on both sides of the SMA line, and the distance between them is determined by the standard deviation.

Moving Average

In the moving average system, the moving average closest to the highest price of the K-line is the short-term pressure level, and the moving average closest to the lowest price of the K-line is the short-term support level.

The resistance and support levels cannot be checked once and for all, especially when playing with contracts. You need to confirm them multiple times and repeatedly to maximize your profits.

3. Set up stop-profit and stop-loss

When a novice is trading perpetual contracts, he or she must first develop a correct concept of profit and loss, rather than blindly pursuing profit and having zero tolerance for loss, otherwise it will be a fatal blow to everyone. Losses should be considered normal for perpetual contracts, but we must learn how to reasonably control losses, reduce the probability of losses and reduce the amount of loss, which is what we should study.

4. Continuously monitor your account

After placing an order, continuous account management and monitoring should be carried out, and positions, margin changes, open orders, etc. should be checked regularly to avoid losses caused by errors or omissions.

For example, if you open the wrong direction and your position is on the verge of collapse, but you are very confident that it will go in the direction you expected, you want to add margin to delay the liquidation, but you find that there is not enough money in your account. This is the problem that will occur if you do not do a good job of account management and monitoring.

Newbies should try to adjust leverage and margin according to actual conditions, determine trading plans and evaluate and revise them regularly.

3. Tips for Stop Loss

Method 1: Set the stop loss in advance according to your own tolerance when opening an order. When the transaction is in progress, execute the stop loss as planned.

For example: when your initial capital is 10,000U, and you can tolerate a loss of 10% of your principal, you can set a stop loss when the loss reaches 10%, and then look for opportunities to enter the market later.

Method 2: After opening an order, you later find that it does not match your expectations. Many situations are not thought of when you make a trading plan, and the psychological pressure will be particularly great after establishing a contract order. In this case, you should stop loss and exit.

Method 3: Set stop loss according to your own operating system.

Everyone can set their own stop loss system. For example, suppose your stop loss system is to sell when the 5-day moving average crosses the 10-day moving average. Everyone's operating system is different, so the stop loss system formed is also different. You should set the stop loss system according to your own operating system.