Understanding Crypto Contracts
Crypto contracts have become a mainstream investment tool in digital currency trading. While they offer profit opportunities, they also carry significant risks. Similar to futures trading, these contracts involve agreements on digital assets that execute at predetermined times based on market prices, regardless of fluctuations. This guide provides a step-by-step tutorial for beginners exploring crypto contract trading.
Step-by-Step Contract Trading Process
1. Determining Market Direction
- Analyze BTC Price Trends: Decide whether to go long (buy) or short (sell).
Contract Types on OKX:
Contract Type Settlement Period Weekly Nearest Friday Bi-weekly Second Friday from trade date Quarterly Last Friday of March/June/Sept/Dec
2. Placing Orders
- Select preferred entry price and trade size.
- Initial Margin = (Contract Value at Entry) ÷ (Leverage Multiplier).
Example: A $1,000 contract with 10x leverage requires $100 margin.
3. Margin Modes
Cross Margin:
- Positions share pooled account equity.
- Requires 100%+ margin rate post-trade.
Isolated Margin:
- Each position’s margin and P&L are calculated separately.
- Trades allowed only if available margin exceeds requirements.
4. Position Management
- Monitor unrealized P&L in real-time.
Liquidation Rules:
- Cross Margin: 10% (10x) or 20% (20x) below maintenance margin triggers forced closure.
- Isolated Margin: Same thresholds apply per position.
5. Adjusting Positions
- Close Positions: Lock profits or cut losses.
- Add Positions: Scale into favorable trends.
6. Settlement
- On expiry, open contracts settle at the delivery index price (USD/point).
- Profits credited to "Realized P&L"; losses deducted from net gains.
Risk Management Strategies
Avoid Excessive Leverage:
- 100x leverage = 1% price swing wipes your position. High risk!
Start Small:
- Use 5–10x leverage initially to preserve capital.
Hedging:
- Combine spot holdings with short contracts to offset market volatility.
👉 Master advanced trading strategies
FAQs
Q: Is crypto contract trading safe?
A: All investments carry risk. Contracts amplify gains/losses—only trade with funds you can afford to lose.
Q: How do I choose a margin mode?
A: Cross margin simplifies management; isolated margin limits risk per trade. Switch when no positions are open.
Q: What happens during liquidation?
A: Positions auto-close if margin falls below thresholds. Losses are deducted from remaining balances.
Key Takeaways
- Crypto contracts require technical knowledge and risk discipline.
- Always backtest strategies before live trading.
- Never invest blindly—research thoroughly via reputable sources.
This guide covers operational basics. For deeper analysis, explore case studies and market data to refine your approach.
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