How to calculate the contract leverage multiple_How to calculate the virtual currency contract multiple

Contract Leverage Multiple Calculation of contract leverage multiple is an important concept in virtual currency contract trading, which determines the potential profit and risk of traders. This article will explore the calculation method of contract leverage multiples to help traders understand and manage the risks in leveraged trading.

Where to play the leverage of virtual currency contracts?

okx Ouyi official website entrance[adid]72b32a1f754ba1c09b3695e0cb6cde7f[/adid]

Ouyi official app[adid]66f041e16a60928b05a7e228a89c3799[/ adi]

Binance official website app[adid]7f39f8317fbdb1988ef4c628eba02591[/adid]

binance Binance official website entrance[adid]9f61408e3afb633e50cdf1b20de6f466[/adid ]

gate.io official website entrance[adid]072b030ba126b2f4b2374f342be9ed44[/adid]

1. The concept of contract leverage multiples (1500 words)

1.1 The meaning of leveraged trading

Leveraged trading refers to the operation of borrowing funds to invest, which is equivalent to leveraging larger funds with less principal, thereby expanding investment. Scale and potential benefits.

a) Margin ratio

In contract trading, margin ratio refers to the ratio of the principal invested by the investor to the funds that can be borrowed. For example, a 10% margin ratio means that investors invest 10 yuan in principal and can borrow 90 yuan in funds for transactions.

b) Risk and Returns

Leveraged trading amplifies returns and also magnifies risks. When market fluctuations are consistent with expectations, leverage can bring considerable returns; on the contrary, when market fluctuations are opposite to expectations, it may lead to large losses, even exceeding the principal.

1.2 Definition of leverage multiple

Leverage multiple refers to the ratio of borrowed funds to principal. For example, a 10-fold leverage multiple means that an investor can borrow 10 times the principal to trade.

a) Calculation formula
Leverage multiple = Available for borrowing funds/principal

b) Example If the investor invests If the principal of 1,000 yuan is used, 10 times the leverage multiple can be borrowed, and the total transaction size is 10,000 yuan.

1.3 Types of leverage multiples

Leverage multiples vary according to different trading platforms and trading types. Common types include:

a) Position-by-position leverage
Position-by-position leverage is suitable for a single transaction, different positions The leverage multiples are independent of each other, and losses will not affect other transactions.

b) Full-Stock Leverage
Full-Stock Leverage is applicable to all unclosed positions, with the same leverage multiple, and losses will affect the overall position.

2. Calculation of the multiples of virtual currency contracts (2000 words)

2.1 Virtual Characteristics of currency contract trading

Virtual currency contract is a leveraged derivative, similar to traditional financial contracts, with the following characteristics:

a) The target assets
The target assets for virtual currency contract transactions are virtual currencies, such as Bitcoin, Ethereum, etc.

b) Two-way trading
Investors can go long or short contracts at the same time to make profits based on changes in the underlying asset price.

c) Leverage effect
Virtual currency contract trading generally provides a higher leverage multiple, amplifying returns and risks.

2.2 Calculation steps for virtual currency contract multiples

a) Determine the margin ratio Margin ratio corresponding to different trading platforms and contract types Different, generally between 1% and 20%.

b) Calculate the borrowable fundsBorrowable funds= principal/margin ratio

c) Calculate the leverage multiple

Leverage multiple = borrowed funds/principal

d) Example
Suppose that the margin ratio of a virtual currency contract trading platform is 5%, and the investor invests 1,000 USDT to trade, then:

The funds can be borrowed = 1,000 USDT / 0.05 = 20000 USDT
Leverage multiple = 20000 USDT / 1000 USDT = 20 times

2.3 Risk warning for virtual currency contract multiples

a ) Risk of liquidationWhen the loss exceeds the margin, the trading platform will force the position to close, and the investor will lose all the principal.

b) Forced closing riskWhen the market fluctuates greatly, the trading platform may trigger the forced closing mechanism, causing investors to fail to appear in time, causing greater losses.

c) Emotional tradingHigh leverage multiples will amplify trading sentiment, causing investors to make irrational decisions and increase the probability of losses.

3. Reasonable choice of contract leverage multiples (1500 words)

3.1 Influencing factors

Reasonable choice of leverage multiples requires multiple considerations Factors, including:

a) Risk tolerance
The higher the leverage multiple, the greater the risk. You should choose carefully based on your own risk tolerance.

b) Market fluctuation situation
The greater the market volatility, the lower the leverage multiple chosen, and vice versa.

c) Trading Strategy
Different trading strategies have different requirements for leverage multiples. For example, if the trend trading tends to choose lower leverage, higher leverage can be considered in short-term trading.

3.2 Reasonable multiple suggestions

Under normal circumstances, for novice investors, it is recommended to choose a leverage multiple of 1-5 times. Experienced investors can choose higher multiples according to their own situation, but it is recommended not exceeding 10 times.

3.3 Risk control measures

No matter what leverage multiple is selected, effective risk control measures should be taken, including:

a ) Stop loss order
Set stop loss orders to limit potential losses and prevent positions from being overturned.

b) Price limit order
Control trading risks by setting price limit orders to reduce the probability of forced flattening.

c) Position management
Rational allocation of funds, avoid concentrated holdings, and diversify investment risks.

IV. Common misunderstandings in leveraged trading (1500 words)

4.1 Disregard risks

Leveraged trading amplifies risks, and novices often underestimate risks, resulting in increased losses.

4.2 Overconfidence

With high leverage multiple, the profit multiple will also be amplified, which will make investors develop excessive confidence and make irrational trading decisions .

4.3 Chasing the rise and selling the fall

Emotional trading will be more obvious in leveraged trading. Investors are prone to chase the rise at the market high and selling the fall at the market low , resulting in frequent losses.

4.4 Frequent operation

The high return temptation brought by leveraged trading will prompt investors to operate frequently, but frequent operation can easily increase transaction costs and disrupt trading strategies.

4.5 Lack of stop loss

Not setting stop loss orders is a common mistake in leveraged trading. When market fluctuations are opposite to expectations, they will lead to uncontrollable losses.

4.6 Too heavy positions

Concentrated positions will amplify risks. Once the market fluctuates in reverse, it will lead to large losses and even liquidation.

4.7 Impulsive increase of positions

Impulsive increase of positions after losses is a common mistake. Trying to make up for losses through higher leverage multiples and positions will often fall into a vicious cycle .

The above is the detailed content of How to calculate the contract leverage multiple_How to calculate the virtual currency contract multiple. For more information, please follow other related articles on the PHP Chinese website!