Will I lose money if I open a long or short position on a contract? Will it be liquidated?

In the field of cryptocurrency, contract trading is currently the most popular trading method. In order to hedge risks and use market fluctuations for arbitrage or hedging transactions, investors will also choose to carry out long and short contracts. Two-way opening actually refers to the trading strategy of opening long and short positions at the same time in the same contract. For novices who are not familiar with contract trading, they are more concerned about whether they will lose money when opening long and short contracts. Generally speaking, it will not lead to direct losses, but there is a possibility. Next, the editor will tell you in detail.

Will I lose money if I open a long or short contract position in both directions?

Opening a long and short contract position will not directly lead to losses, because its purpose is to hedge risks and take advantage of market fluctuations for arbitrage or hedging transactions. However, in actual operation, two-way opening of long and short contracts may also face some risks and costs, which may lead to losses, including but not limited to handling fee costs, slippage costs, market risks and position fees. The following is a detailed analysis :

1. Handling fee cost:

When conducting contract transactions, you usually need to pay handling fees for opening, closing, and holding a position overnight. These fees may have an impact on profits.

2. Slippage cost:

When the market fluctuates significantly, the price may deviate due to slippage, resulting in a difference between the actual transaction price and the expected price, which will increase the cost of the transaction. .

3. Market risk:

Although positions are hedged, under extreme market conditions, such as sharp market fluctuations or insufficient liquidity, sometimes you may encounter situations where complete hedging cannot be achieved. This may result in losses.

4. Position fees:

Some exchanges charge position fees for holding positions. If the position is held for a long time, these fees may accumulate into additional costs.

Will opening a long and short contract position in both directions result in a liquidation of the position?

Opening a long and short two-way contract position will not result in a liquidation. Two-way opening of a long and short position is a risk-hedging trading strategy that aims to hedge market risks by holding long and short positions at the same time. However, although opening long and short positions is a method of hedging risks, there is still the risk of liquidation, which depends on a variety of factors, such as market price fluctuations, leverage multiples, fund management, etc. Three situations that may lead to position liquidation in contract transactions include:

1. Market price fluctuations:

If the market price fluctuates violently, the hedging position cannot be hedged in a timely and effective manner, or the position may be held. If the value of the position decreases rapidly, the liquidation mechanism may be triggered.

2. Leverage trading:

If you use leverage for contract trading and market fluctuations cause your losses to exceed the margin requirements of your account, then a liquidation may occur. In Binance futures trading, there is a leverage setting, and you can choose an appropriate leverage ratio based on your personal risk tolerance.

3. Insufficient account funds:

If your account funds are insufficient to meet the maintenance margin requirements, such as position fees incurred due to holding positions overnight or account fund losses, it may also be triggered. Liquidation.

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