What is contract trading in the currency circle?

Contract trading is a kind of derivatives trading, small and large, can be traded in both directions, and is open 24/7. Its advantages include high leverage, but it also comes with high risks, including liquidation and liquidation fees. Contract trading can be used for hedging risks, arbitrage and short-term speculation. Pay attention to risk management, technical analysis and capital management.

Contract trading: A feast of leverage in the currency circle

Contract trading is a special trading method in the currency circle, which uses a small principal to leverage high leverage and amplify trading gains or losses.

What is contract trading?

Contract trading is a kind of derivatives trading. The object of the transaction is not a spot asset, but a contract based on the price fluctuation of the underlying asset. The buyer and seller agree to buy or sell the underlying asset at a specific price in the future at a specific time in the future.

Advantages of contract trading

• High leverage: Allows the use of leverage to amplify trading funds and make a big gain with a small amount.
• Two-way trading: You can go long (buy) and short (sell) at the same time, and you can make a profit regardless of whether the price of the underlying asset rises or falls.
• 24/7 trading: no time limits.

Risks of contract trading

• High risk: While leverage magnifies returns, it also magnifies risks, which may lead to huge losses.
• Liquidation: The higher the leverage, the greater the risk of liquidation (loss of all principal).
• Closing fee: Positions need to be closed on time, otherwise a closing fee will be incurred and transaction costs will increase.

Types of contract transactions

• Perpetual contracts: There is no expiration date and can be held indefinitely.
• Delivery contract: It expires at a specific time point and needs to be closed or rolled over.

Application of contract trading

• Hedging risks: While holding spot assets, use contract transactions for hedging to reduce risks.
• Arbitrage trading: Use the price difference between different exchanges or markets to perform arbitrage operations.
• Short-term speculation: Use high leverage and two-way trading characteristics to conduct short-term speculation.

Notes on contract trading

• Risk management: Control leverage and avoid over-trading.
• Technical analysis: Analyze market trends and determine trading direction.
• Fund Management: Allocate trading funds to avoid investing too much money at one time.

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