Newbies in contract trading need to pay attention to the following aspects to reduce risks and increase the chances of success:
1: Set Stop Loss and Take Profit
In contract trading, market price fluctuations are very rapid, especially in the cryptocurrency market. To avoid incurring huge losses during short-term fluctuations, setting stop loss and take profit is crucial.
Stop Loss: Automatically close the position when losses reach a certain amount to prevent further losses.
Take Profit: Automatically close the position when profits reach the target to secure profits and prevent a market reversal from turning profits into losses.
Recommendation: Set stop loss and take profit before each trade and strictly execute the trading plan. (Generally, the take profit is about two to three times the stop loss.)
2: Use Leverage Wisely
Contract trading allows the use of leverage, which amplifies both profits and risks. Beginners can easily face liquidation due to high leverage. It is recommended that beginners start with low leverage, around 20-30x, so that even with significant market fluctuations, the losses will not be too large.
Recommendation: Beginners should maintain low leverage and consider increasing the leverage ratio only after becoming familiar with market fluctuations.
3: Do Not Trade with Heavy Positions
Heavy positions mean using a large portion of funds for a single trade, which carries extremely high risk. If the market moves contrary to expectations, it can lead to significant losses. Beginners should diversify their funds and avoid investing too much at once.
Recommendation: The funds for a single trade should be controlled within 20% of the total funds to ensure adequate capital to address potential risks.
4: Emotional Control, Avoid Impulsive Trading
Contract trading is highly volatile, making it easy for people to have emotional reactions that lead to irrational trading decisions. Panic closing and greedy position increases are common mistakes for beginners.
Recommendation: Develop a trading plan, maintain rationality, and do not frequently change trading strategies due to short-term gains and losses.
5: Fully Understand the Market and Contract Rules
Before entering contract trading, beginners must understand how the market operates and the different types of contracts offered by trading platforms (such as futures contracts, perpetual contracts, etc.), and understand mechanisms like leverage, forced liquidation, and margin to avoid losses due to lack of understanding of the rules.
Recommendation: Conduct thorough market research before trading or accumulate experience through simulated trading.
6: Continuously Learn Technical Analysis
Technical analysis is an effective tool for judging market trends. Beginners can learn some basic technical analysis tools and indicators, such as Moving Averages (MA), Relative Strength Index (RSI), Bollinger Bands, etc.
Recommendation: Use technical analysis tools to determine trends and fluctuations, helping to make more rational trading decisions.
Summary:
Beginners in contract trading need to focus on risk management, remain rational, learn trading rules and technical analysis, and be particularly cautious with leverage and emotional trading. By gradually accumulating experience and strictly following the trading plan, beginners can also achieve good returns in contract trading.
