How to trade contracts for beginners

Newbie want to play contract trading? First understand the concepts of leverage, margin, etc., and choose a safe and easy-to-use platform, such as Binance, Ouyi, Bybit, Gate.io. After registering and certification, be familiar with the trading interface and strongly recommend using simulated trading first. Real trading starts with small amounts, and must strictly control the risk, use low leverage, set stop loss, and control positions.

Contract trading, also known as futures trading, is an advanced gameplay with high risk and high returns in the cryptocurrency world. It allows you to amplify your returns through leverage, but also magnify the risk of losses. For novices, it can be a disaster to get started with contract trading directly. Therefore, this article will provide you with a detailed guide to getting started with contract trading, helping you explore the world of contract trading safely from scratch, step by step.

Step 1: Understand the basic concepts of contract trading

Before you start a practical operation, you need to understand some key concepts:

• Contract: An agreement that agrees to buy or sell an asset at a certain price at a certain time in the future.
• Underlying Asset: Assets represented by the contract, such as Bitcoin (BTC), Ethereum (ETH), etc.
• Leverage: A tool to amplify your trading size. For example, 10x leverage means you only need $100 margin to control a $1,000 contract.
• Margin: The funds you need to deposit as collateral for holding the contract.
• Long: predicts the increase in the underlying asset price and buy the contract.
• Short: predicts the price of the underlying asset to fall and sell the contract.
• Forced liquidation: When your account balance is below the maintenance margin level, your position will be forced to liquidate and you will lose your margin.
• Funding Rate: The price of a perpetual contract will be affected by the spot market price, and the exchange will charge or pay the funding rate to balance the price.

Step 2: Choose a suitable trading platform

It is crucial to choose a safe, reliable, user-experience-friendly trading platform. You can consider the following factors:

• Security: Does the exchange adopt security measures such as cold storage and multi-signature?
• Liquidity: Is the exchange's trading volume large enough?
• User experience: Is the exchange's interface simple and easy to understand? Are there any tutorials for beginners?
• Fees: Are the transaction fees and funding rates on the exchange reasonable?
• Currency selection: Does the exchange support the currency you want to trade?

Here are some common exchanges that offer contract trading:

• Binance
• OkX
• Bybit
• Sesame Door Open (Gate.io)

Step 3: Registration and real-name authentication

After selecting a good exchange, you need to register an account and complete real-name authentication. This helps the exchange understand who you are and prevents illegal activities such as money laundering.

Step 4: Familiar with the trading interface

Spend time to familiarize yourself with the various functions and buttons of the trading interface. Pay special attention to the following areas:

• K-line chart: used to analyze price trends.
• Order Book: Displays orders bought and sold in the current market.
• Order area: Used to create and submit orders.
• Position information: Displays information about the positions you are currently holding.

Step 5: Simulated trading (strongly recommended)

Before making real transactions, it is highly recommended that you conduct simulated transactions first. Most exchanges provide simulated trading functions, where you can trade with virtual funds, be familiar with the trading process, and test your trading strategies.

Step 6: Small real transaction

After a certain success in the simulation transaction, you can start small real transactions. Trading with small amounts of funds allows you to gradually become familiar with the real market environment while controlling risks.

Step 7: Risk management is crucial

Contract trading is extremely risky, and risk management is crucial. Here are some risk management tips:

• Use low leverage: The higher the leverage, the higher the risk. It is recommended that novices use 2-5 times low leverage.
• Setting a stop loss order: Stop loss order can help you automatically close the position when the market price reaches the preset loss level and control risks.
• Control position size: Do not invest all funds into one position.
• Don’t be greedy: Stop profits in time when making a profit, and stop loss in time when losing.
• Don't be emotional: Stay calm and don't be influenced by emotions in your trading decisions.

Step 8: Continuous Learning and Improvement

Contract trading is a process that requires continuous learning and improvement. Only by continuously learning new trading skills, analyzing the market, and summarizing experiences and lessons can you succeed in the contract trading market.

warn:

Contract trading is extremely risky, so please be careful. Before trading, make sure you are fully aware of the risks of contract trading and are well prepared. Don't trade with funds you can't afford to lose.

Summarize:

Contract trading is a high-risk and high-yield trading method suitable for experienced traders. For beginners, it is crucial to understand the basic concepts, choose the right platform, be familiar with the trading interface, conduct simulated transactions, and control risks. Hopefully this guide will help you explore the world of contract trading safely. Good luck!

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