Position Opening Beginner's Guide: A Must-Read for Newcomers

Beginner1/26/2025, 6:26:18 AM
This article is a detailed beginner's guide to entering a position in contracts, helping you quickly understand the basic concepts of contract trading, operation steps, and risk management techniques, allowing you to safely start trading digital currencies.

What is contract trading


Image source:https://www.gate.io/futures/USDT/BTC_USDT

Contract trading is a derivative trading method that allows investors to buy or sell based on the price fluctuations of underlying assets, without directly purchasing the assets, in order to profit from it. In the cryptocurrency market, contract trading usually involves cryptocurrencies such as Bitcoin and Ethereum. The characteristic of contract trading is the ability to leverage, which means using a smaller amount of capital to access larger market opportunities.

Basic concept of contract opening position

What is Enter a Position?

Entering a position refers to buying or selling operations in contract trading at a specified price and quantity, thereby entering the market. After entering a position, you will hold a contract position, which means you bear the risk and profit opportunities of market price fluctuations. Entering a position is divided into two methods: ‘entering a long position’ and ‘entering a short position’, depending on your market judgment.

Why do you need to Enter a Position?

Entering a position is the first step in contract trading, allowing you to establish a profitable position in the market. Whether it’s a long or short position, entering a position is the basis for profiting from market price fluctuations. If you anticipate that the price of a certain asset will rise, you can choose ‘enter a long position’ to potentially gain profits; if you expect the price to fall, you can choose ‘enter a short position’ for a short-selling operation. Simply put: entering a long position = going long = believing the token will rise, entering a short position = shorting = believing the token will fall.

Contract Trading Type

When trading contracts, you will encounter different types of contracts. Understanding the characteristics of these contracts can help you make wiser decisions.

Perpetual Contracts vs. Futures Contracts

  1. Perpetual Contract: A perpetual contract is a contract without an expiration date and can be held for a long term. This type of contract usually has a funding rate mechanism to ensure that the price remains consistent with the spot market. Investors can enter a position or close a position at any time, providing high flexibility.
  2. Delivery Contract: A delivery contract is a contract with an expiration date, which usually expires at a fixed time and settles based on the market price at expiration. Prior to expiration, investors need to decide whether to close the position or extend the contract based on market conditions.

Long and Short

  1. Long position: When you expect the price of a certain asset to rise, you can choose to go long. Going long means buying a contract, and you can close the position and make a profit when the price rises.
  2. Short Selling: Short selling refers to profiting from selling contracts when prices are falling. Short selling can help you profit from a market decline, but it also means taking on higher risks.

How to Enter a Position in a Contract

Although opening a contract position may sound complicated, as long as you grasp the basic operation process, it is not difficult. Below are the basic steps for opening a contract position:

Select Contract Type

First, you need to choose a type of contract. On most trading platforms, you can choose between perpetual contracts or futures contracts. Choose the appropriate contract based on market conditions and your investment goals. Next, let’s take Gate.io as an example to explain.

Set Enter a Position Parameters

  1. Leverage: One of the key features of contract trading is the ability to use leverage. Leverage refers to using a smaller amount of capital to control larger market funds. For example, a leverage of 10x means you can control a contract worth 10,000 yuan with a capital of 1,000 yuan. However, it’s important to note that leverage also amplifies risks, and losses may be larger than expected.
  2. Opening Price: Same as Spot Purchase: Divided into Limit Price and Market Price Modes
  3. Stop Loss and Take Profit: Setting stop loss and take profit is very important for effectively controlling risk. Stop loss refers to automatically closing a position when the price reaches a certain loss point, while take profit refers to automatically closing a position when the price reaches a predetermined profit point.

Enter a Position

After completing the above settings, you can click the “Enter a Position” button to execute the operation. The trading platform will enter a position according to the price and quantity you have selected.

Close a Position

You can choose to close the position manually or set stop loss and take profit. On the Gate.io platform, there are multiple ways to close a position. For specific operation, please refer to the article: Contract Trading Tutorial: Quick Start Guide for Beginners.

https://www.gate.io/zh/learn/articles/future-trading-tutorial-a-quick-start-guide-for-beginners/5478

Risk Management in Futures Trading

Although contract trading has the potential for high profits, it also comes with significant risks. Therefore, a good risk management strategy is essential for every contract trader.

Using Stop Loss and Take Profit

Stop-loss and take-profit are effective tools for controlling risks. Stop-loss helps you automatically close positions when the market is unfavorable, reducing losses. Take-profit ensures that you can profit in a timely manner when the market price reaches the expected target, avoiding losses caused by market reversals.

Margin and Leverage Management

In contract trading, margin is the fund you must deposit into your account, and it is the “base position” that you take on trading risks. Although the use of leverage can amplify profits, it can also amplify losses. Therefore, investors need to carefully choose the leverage multiple and maintain a sufficient margin balance to avoid forced liquidation.

Frequently Asked Questions

What is forced liquidation? Forced liquidation refers to the automatic closing of positions by the trading platform when the margin in your account is insufficient to support the current position, in order to protect the platform’s capital safety.

How to choose the right leverage? Beginners are advised to choose a low leverage ratio and gradually become familiar with market fluctuations and risk management before considering increasing the leverage ratio.

Can you short all assets? Not all platforms allow shorting. It depends on the contract type and rules of the trading platform you are using.

Summary and Suggestions

Entering a position is the first step to enter the futures market. It is essential to master the basic concepts of futures, trading types, and risk management techniques. For beginners, understanding the role of leverage, setting stop-loss and take-profit levels reasonably, and carefully selecting trading strategies are the keys to success.

Before starting contract trading, it is recommended to conduct sufficient market research and simulated trading to accumulate experience. With a deeper understanding of the market, you will be able to gain a better trading experience in the cryptocurrency contract market. Gate.io not only provides a secure contract trading platform, but also offers users comprehensive courses. Click to learn:https://www.gate.io/en/futures/trading-guide-for-beginners

著者: Max
レビュアー: Pow
* 本情報はGate.ioが提供または保証する金融アドバイス、その他のいかなる種類の推奨を意図したものではなく、構成するものではありません。
* 本記事はGate.ioを参照することなく複製/送信/複写することを禁じます。違反した場合は著作権法の侵害となり法的措置の対象となります。

Position Opening Beginner's Guide: A Must-Read for Newcomers

Beginner1/26/2025, 6:26:18 AM
This article is a detailed beginner's guide to entering a position in contracts, helping you quickly understand the basic concepts of contract trading, operation steps, and risk management techniques, allowing you to safely start trading digital currencies.

What is contract trading


Image source:https://www.gate.io/futures/USDT/BTC_USDT

Contract trading is a derivative trading method that allows investors to buy or sell based on the price fluctuations of underlying assets, without directly purchasing the assets, in order to profit from it. In the cryptocurrency market, contract trading usually involves cryptocurrencies such as Bitcoin and Ethereum. The characteristic of contract trading is the ability to leverage, which means using a smaller amount of capital to access larger market opportunities.

Basic concept of contract opening position

What is Enter a Position?

Entering a position refers to buying or selling operations in contract trading at a specified price and quantity, thereby entering the market. After entering a position, you will hold a contract position, which means you bear the risk and profit opportunities of market price fluctuations. Entering a position is divided into two methods: ‘entering a long position’ and ‘entering a short position’, depending on your market judgment.

Why do you need to Enter a Position?

Entering a position is the first step in contract trading, allowing you to establish a profitable position in the market. Whether it’s a long or short position, entering a position is the basis for profiting from market price fluctuations. If you anticipate that the price of a certain asset will rise, you can choose ‘enter a long position’ to potentially gain profits; if you expect the price to fall, you can choose ‘enter a short position’ for a short-selling operation. Simply put: entering a long position = going long = believing the token will rise, entering a short position = shorting = believing the token will fall.

Contract Trading Type

When trading contracts, you will encounter different types of contracts. Understanding the characteristics of these contracts can help you make wiser decisions.

Perpetual Contracts vs. Futures Contracts

  1. Perpetual Contract: A perpetual contract is a contract without an expiration date and can be held for a long term. This type of contract usually has a funding rate mechanism to ensure that the price remains consistent with the spot market. Investors can enter a position or close a position at any time, providing high flexibility.
  2. Delivery Contract: A delivery contract is a contract with an expiration date, which usually expires at a fixed time and settles based on the market price at expiration. Prior to expiration, investors need to decide whether to close the position or extend the contract based on market conditions.

Long and Short

  1. Long position: When you expect the price of a certain asset to rise, you can choose to go long. Going long means buying a contract, and you can close the position and make a profit when the price rises.
  2. Short Selling: Short selling refers to profiting from selling contracts when prices are falling. Short selling can help you profit from a market decline, but it also means taking on higher risks.

How to Enter a Position in a Contract

Although opening a contract position may sound complicated, as long as you grasp the basic operation process, it is not difficult. Below are the basic steps for opening a contract position:

Select Contract Type

First, you need to choose a type of contract. On most trading platforms, you can choose between perpetual contracts or futures contracts. Choose the appropriate contract based on market conditions and your investment goals. Next, let’s take Gate.io as an example to explain.

Set Enter a Position Parameters

  1. Leverage: One of the key features of contract trading is the ability to use leverage. Leverage refers to using a smaller amount of capital to control larger market funds. For example, a leverage of 10x means you can control a contract worth 10,000 yuan with a capital of 1,000 yuan. However, it’s important to note that leverage also amplifies risks, and losses may be larger than expected.
  2. Opening Price: Same as Spot Purchase: Divided into Limit Price and Market Price Modes
  3. Stop Loss and Take Profit: Setting stop loss and take profit is very important for effectively controlling risk. Stop loss refers to automatically closing a position when the price reaches a certain loss point, while take profit refers to automatically closing a position when the price reaches a predetermined profit point.

Enter a Position

After completing the above settings, you can click the “Enter a Position” button to execute the operation. The trading platform will enter a position according to the price and quantity you have selected.

Close a Position

You can choose to close the position manually or set stop loss and take profit. On the Gate.io platform, there are multiple ways to close a position. For specific operation, please refer to the article: Contract Trading Tutorial: Quick Start Guide for Beginners.

https://www.gate.io/zh/learn/articles/future-trading-tutorial-a-quick-start-guide-for-beginners/5478

Risk Management in Futures Trading

Although contract trading has the potential for high profits, it also comes with significant risks. Therefore, a good risk management strategy is essential for every contract trader.

Using Stop Loss and Take Profit

Stop-loss and take-profit are effective tools for controlling risks. Stop-loss helps you automatically close positions when the market is unfavorable, reducing losses. Take-profit ensures that you can profit in a timely manner when the market price reaches the expected target, avoiding losses caused by market reversals.

Margin and Leverage Management

In contract trading, margin is the fund you must deposit into your account, and it is the “base position” that you take on trading risks. Although the use of leverage can amplify profits, it can also amplify losses. Therefore, investors need to carefully choose the leverage multiple and maintain a sufficient margin balance to avoid forced liquidation.

Frequently Asked Questions

What is forced liquidation? Forced liquidation refers to the automatic closing of positions by the trading platform when the margin in your account is insufficient to support the current position, in order to protect the platform’s capital safety.

How to choose the right leverage? Beginners are advised to choose a low leverage ratio and gradually become familiar with market fluctuations and risk management before considering increasing the leverage ratio.

Can you short all assets? Not all platforms allow shorting. It depends on the contract type and rules of the trading platform you are using.

Summary and Suggestions

Entering a position is the first step to enter the futures market. It is essential to master the basic concepts of futures, trading types, and risk management techniques. For beginners, understanding the role of leverage, setting stop-loss and take-profit levels reasonably, and carefully selecting trading strategies are the keys to success.

Before starting contract trading, it is recommended to conduct sufficient market research and simulated trading to accumulate experience. With a deeper understanding of the market, you will be able to gain a better trading experience in the cryptocurrency contract market. Gate.io not only provides a secure contract trading platform, but also offers users comprehensive courses. Click to learn:https://www.gate.io/en/futures/trading-guide-for-beginners

著者: Max
レビュアー: Pow
* 本情報はGate.ioが提供または保証する金融アドバイス、その他のいかなる種類の推奨を意図したものではなく、構成するものではありません。
* 本記事はGate.ioを参照することなく複製/送信/複写することを禁じます。違反した場合は著作権法の侵害となり法的措置の対象となります。
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