Today, Qiu will briefly explain the difference between spot trading and contract trading in cryptocurrency.
You can understand spot trading as buying and selling a commodity. For example, if there is a coin currently priced at 1 yuan, and you buy 10, your cost is 10 yuan. Later, if the coin rises to 2 yuan, you sell all 10 and get 20 yuan, where 10 yuan is your principal, and 10 yuan is profit. Conversely, if the coin drops to 0.5 yuan, selling all 10 gives you 5 yuan, resulting in a loss of 5 yuan. Spot trading is actually the same as the stock market, involving buying low and selling high; shorting is not possible.
Contract trading is a type of financial derivative trading, where you buy or sell an asset through a contract, rather than directly buying or selling the physical asset. Simply put, contracts are not a commodity; they are an agreement between you and the platform, a form of option. Contract trading can involve leverage; for example, if you are optimistic about a coin currently priced at 1 yuan, and you believe it will rise to 2 yuan soon, but you don’t have enough funds (for instance, you only have 1000 yuan in total),
If the price rises to 2 yuan, you only make 1000 yuan. You can leverage contract trading by borrowing on the platform, with an opening price of 1 yuan (coin price), a margin of 1000 yuan at 100x leverage (the platform lends you 100,000), then your position value is 100,000. If the coin price rises to 2 yuan, your position value becomes 200,000. After closing, you return the 100,000 borrowed from the platform (leverage), and your profit is 100,000. But, but, but, if the coin price drops by 1%, meaning it drops to 0.99, then you will face liquidation. This is the charm of contract leverage; shorting works similarly.
Here, Qiu emphasizes: It is not advisable for large funds to engage in contracts. Compared to spot trading, contracts carry much higher risks and test human nature. Before your skills mature, it is recommended to play contracts with small positions and focus on spot trading.
Why do some people say not to play contracts in crypto trading?
Because that is a correct but useless statement.
Investing needs to be based on your own situation, not blindly following others' advice.
If you only have 10,000 or 20,000, trading BTC and ETH in spot isn't as good as delivering takeout. If you have 1 million, trading BTC and ETH in spot is a solid happiness.
The stock market is the same; people with 20,000 or 30,000 daily engage in value investing. It makes me want to laugh; isn't that pure nonsense?
Similarly in crypto trading, if someone has only a few thousand and you recommend buying top ten cryptocurrencies by market cap, isn't that crazy?
For some people, not trading contracts is seen as the right choice, telling everyone not to trade contracts. There’s no valuable content in their monologue. If you already have a few million, you don’t need anyone else's advice.
If you don’t even have 50,000, then you need to think hard. In this market, you either lose everything or get rich; there’s no middle ground, and most end up losing everything.
When short on money, it’s even more important to open your mind and dare to gamble, to try your luck twice. If you make a heavy investment once, you’re not much different from a pro; essentially, it’s all about luck. After placing ten orders, the gap between you and the pros becomes apparent; they have trading systems, capital management, and information sources, while you have none. Pros are likely to win, and you will definitely lose. Understanding this sentence gives you a chance to get rich quickly.
Ordinary people trading crypto don’t just look at this or buy that, buying a pile of junk while fantasizing about buying a tenfold coin. Instead, they should boldly go all in, first believing in their luck. When you understand the difference between going all in once and placing ten orders, you already have hope for accumulating your first bucket of gold!
Without a mature trading system, it’s like sailing without a compass—lost in the dark, chaotic trading cannot achieve stable profits.
Today, I’ll share about the common types of contract trading operations in the crypto space (using U-based as an example):
1. Large capital operation method: When the capital scale is large, stability and risk control are core.
1.1 Low leverage operation: Leverage ratio: mainly 2-3x, not exceeding 5x.
Asset selection: Altcoins usually choose 2-3x leverage, suitable for medium to long-term strategies.
Risk control points: Strictly set stop-loss, incremental position mode is more common.
1.2 Medium leverage operation: Leverage ratio: mainly 5-10x, typically controlled at 10x.
Asset selection: Mainstream coins, short to medium-term operations.
Risk control points: Combining clear stop-loss settings.
1.3 High leverage operation: Leverage ratio: 100x or higher, depending on the exchange’s maximum (125-200x or even higher).
Potential scenario: Mainly used for high-risk speculation; even with a large amount of capital, some still attempt high leverage for greater profits (also known as 'gambling with life').
Risk reminder: High leverage can magnify profits, but the risks are immense, and a slight misstep may lead to significant losses.
2. Small to medium capital operation method: When the capital scale is small, risk awareness and strategy execution capability become key.
2.1 High leverage speculation: Leverage ratio: 100x or higher.
Trading mode: Usually adopts incremental position mode, with a small capital scale (single margin such as 10-100 U), mainly for speculation.
Common groups: Mostly inexperienced newcomers, who have not fully mastered risk awareness, are prone to liquidation, or some aim to gain traffic.
Potential problems: High liquidation rate, easily caught in a cycle of frequent losses.
2.2 Medium to high leverage attempts: Leverage ratio: 20-100x.
Operational characteristics: Starting to realize the relationship between leverage and risk, but often lacking the capacity to bear risk, like a ticking time bomb (this is the situation for most people in the market, who already know the risks of leverage but still want to take a chance, under the belief that without taking risks, there are no opportunities).
Potential risks: Even with some improvement, frequent 'stepping on mines' may still occur due to inadequate risk assessment.
2.3 'Define Loss by Quantity' strategy: Leverage characteristics: At this time, the leverage ratio is only superficial, affecting the utilization of margin.
Characteristics: Based on the maximum acceptable loss per trade for position sizing, gradually mastering position control.
Core of risk control: Avoiding single losses impacting overall capital, ensuring sustainable trading capability.
3. Suggested healthy contract trading methods
3.1 Low leverage + clear stop-loss (defining loss by quantity): Leverage ratio: Recommended 2-3x, trying to avoid the impact of 'black swan' events.
Risk control points: Combine the 'define loss by quantity' principle with strict stop-loss. For altcoin operations: Setting stop-losses is particularly critical to prevent major losses or capital drawdown due to severe volatility.
In the crypto space, if you don’t want to get scammed, remember these well!
1. Don’t dream of getting rich overnight—fantasizing about wealth often leads to losses.
2. Don’t go all in; diversify your trades—spreading risks leads to stability.
3. Even if you earn over 20,000 daily, be cautious—maintain caution, don’t get carried away.
4. Always set stop-losses in contract trading—prevent crashes, stop-loss is the bottom line.
5. Be patient—coins you buy need time to settle, rushing for success will lead to wasted efforts.
6. Every profit in the crypto space means someone else’s loss—maintain a stable mindset, don’t be greedy.
7. Using spare money is an advantage—if you have spare money to invest, you are already ahead of 90% of retail investors.
8. Be cautious with coins that have plummeted dozens of times—avoid worthless coins, but feel free to buy good coins that have dropped around 10 times, waiting for a bull market to recover.
The skills have already been shared with you all; whether you can gain fame in the industry depends on yourselves. These methods should definitely be saved and reviewed multiple times. If you find them useful, feel free to share them with more people trading cryptocurrencies around you.
These days, I am preparing for a great opportunity that is about to begin!!!
Comment 777, let's go!!!
No constant brings no constant!!!
