Newbie Must Read! Contract Trading Guide: Understand the Rules + Avoid Liquidation, From 0 to 1 Without Pitfalls
Many newcomers are interested in contracts but don't understand the rules or risk control, and they get harvested by the market right away. Today, in the most practical way, I will explain how to trade contracts in 3 minutes, how to make profits without liquidation!
1. What is contract trading?
In a nutshell: You don't have to actually hold the coins; you just need to predict the price movements to make money—if you're wrong, you lose.
Bullish → Go Long Bearish → Go Short
2. Two common types of contracts
Perpetual Contracts: No fixed delivery date, can be held long-term, anchored to spot prices through "funding rates" (mutual payment of fees between long and short positions). Futures Contracts: Have a fixed expiration date (mainly quarterly/next quarterly), settled at the spot price upon expiration.
3. 5 basic concepts, understand them to get started
Position Size: The smallest trading unit, each currency has a different value per contract. Leverage: Amplifies profits but also amplifies losses; a 10x leverage drop of 10% could lead to immediate liquidation. Opening a Position: Buy to go long (bullish), sell to go short (bearish). Closing a Position: End trading at market/limit price to lock in profits or losses. Forced Liquidation: The system automatically closes positions when the margin is insufficient to avoid account depletion.
4. 4 iron rules of risk control, essential for newbies
Leverage ≤ 5x: The higher the leverage, the quicker the death; with 5x leverage, a 20% drop leads to liquidation, offering a higher margin of error. Single Trade Stop Loss ≤ 3%: With 100,000 capital, the maximum loss per trade is 3,000; even with 3 consecutive wrong trades, 91% of the capital remains operable. Only trade mainstream coins (BTC/ETH): Strong consensus, stable volatility, few price spikes; small coins may seem exciting but are actually risky. Only trade during market hours (9:00-18:00): Around 3 AM is a peak time for liquidation; the volatility is illogical, so newbies should avoid it.
Final heartfelt advice: Contracts can earn quick money, but long-term profits rely on "direction + discipline + risk control." First learn not to lose, then learn to make money—start with a simulated account for practice, then use small real funds, avoid gambling-style trading, and the more stable you are, the further you'll go!
