For beginners in cryptocurrency contracts, here are some important methods to control risks:
Knowledge learning
- Deepen your understanding of the basic concepts of cryptocurrency contracts, including what contract trading is, trading mechanisms (such as going long and going short), and types of contracts (such as perpetual contracts and delivery contracts). Mastering this foundational knowledge is the first step in identifying risks.
- Learn technical analysis and fundamental analysis. Technical analysis can help you understand price charts, such as by observing candlestick patterns and moving averages to determine market trends; fundamental analysis focuses on the development, team, market demand, and other factors of the cryptocurrency projects themselves, which helps evaluate their long-term value.
Capital management
- Only use funds that you can afford to lose for contract trading. It is advisable to keep the funds used for contract trading within a certain percentage of financial assets, such as 10% - 20%, to avoid financial instability and impact on quality of life due to losses.
- Set positions reasonably. Beginners should not take on too heavy positions when starting to trade; it is generally recommended that a single contract's position should not exceed 10% of total funds. This way, even if one trade incurs a loss, it will not cause a devastating blow to overall capital.
Risk control tools
- Be proficient in using stop-loss and take-profit. A stop-loss refers to automatically closing a position when the price reaches a preset loss point to limit losses; a take-profit is when a position is automatically closed at a preset profit point to lock in profits. When setting stop-loss and take-profit levels, it’s important to determine reasonable price points based on market conditions and personal risk tolerance.
- Understand and utilize the margin system. Reasonably control the margin ratio to avoid forced liquidation due to insufficient margin. When market trends are unfavorable, timely add margin or adjust positions.
Trading strategies
- Avoid overtrading. Beginners are easily influenced by market emotions and frequently buy and sell. Be patient and wait for suitable trading opportunities, such as when the market shows clear trend signals or when prices correct to key support/resistance levels before trading.
- Adopt simple trading strategies. For example, trend-following strategies, which involve going long when the market is in an uptrend and going short when in a downtrend; or breakout strategies, which involve going long when the price breaks through significant resistance levels and going short when it falls below significant support levels. After accumulating some experience, attempt more complex strategies.
Emotional management
- Control greed and fear emotions. Greed may cause investors to be unwilling to take profits in a timely manner, leading to profit retracement; fear may cause panic during losses, leading to poor decisions, such as excessive stop-losses or blindly increasing positions. Learn to maintain a calm and rational trading mindset.