How to trade contracts with Bitcoin! If you are a newcomer to the cryptocurrency world, you might be confused by terms like Bitcoin futures and perpetual contracts. You can take a good look at the following article on how to trade contracts on Binance!
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- What is contract trading?
Let's clarify one question: What is contract trading?
In simple terms, contract trading is like you and someone else agreeing on a protocol to buy and sell a certain asset at an agreed price at a future time. In the cryptocurrency world, contract trading usually refers to buying and selling digital currencies like Bitcoin through contracts.
For example: If you think the price of Bitcoin will rise, you can buy a Bitcoin futures contract; if you think the price will fall, you can buy a short contract. Ultimately, regardless of whether the price rises or falls, you can earn the price difference based on the contract's buying and selling rules.
- What is a perpetual contract?
Some of you might find the term perpetual contract unfamiliar. In fact, it is similar to a futures contract, but with one significant difference—perpetual contracts do not have an expiration date.
Generally, futures contracts have an expiration date and need to be settled after expiration. However, perpetual contracts do not have an expiration date; you can hold your position indefinitely as long as your funds are sufficient. It's like you and someone else have reached an indefinite agreement until you choose to close the position.
- Why trade contracts?
Some of you might ask, "Is contract trading difficult? Why not just buy and hold coins?"
In fact, contract trading has two significant advantages:
Leverage effect: You can use leverage, which means controlling a larger trading amount with a smaller amount of funds to earn more profit. For example, you can use 100 USDT to control a contract position of 1000 USDT, so even if the market fluctuates slightly, you can still achieve considerable gains (but the risks will also be greater).
Long and short: Contract trading allows you to make money not only when prices rise but also when prices fall. This provides you with more opportunities to profit, regardless of whether the market is bullish or bearish.
4. Binance contract trading APP order guide
After all this, you must be eager to know how to operate! Below, I will introduce how to place an order on the Binance contract trading APP.
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Download and log in to the Binance APP
First, ensure that you have downloaded and installed the Binance APP on your phone. Log in to your Binance account; if you don't have an account, you can register one first. -
Select the contract trading interface
After logging in, on the homepage of the Binance APP, you will see an option for "Contracts" at the bottom. Click to enter the contract trading interface. Here you can choose to trade perpetual contracts. -
Choose contract type and cryptocurrency
In the contract trading interface, you can select the cryptocurrency you want to trade, such as Bitcoin or Ethereum. Then choose the type of contract you want to trade—such as "perpetual contract" or "delivery contract." -
Set leverage multiplier
In contract trading, you can set the leverage multiplier, which determines how much you can amplify your trading volume. Generally, Binance offers leverage options ranging from 1x to 125x.
Tip: The higher the leverage multiplier, the greater the potential profit, but the risks will also be higher. Therefore, be cautious when choosing leverage and do not blindly pursue high leverage.
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Choose buy/sell direction
Based on your view of the market, choose whether to go long (buy) or short (sell). If you believe the market will rise, choose to go long; if you believe the market will fall, choose to go short. -
Set stop-loss and take-profit
To reduce risk, you can set stop-loss and take-profit in contract trading. This is like setting an "automatic exit" rule for yourself; when the market price reaches your set conditions, it will automatically close the position to lock in profits or stop losses. -
Place the order and confirm
After confirming all settings, click buy or sell to place the order. Binance will prompt you to confirm the order; after verifying that everything is correct, click confirm. -
Tips for virtual currency contract trading
Stay calm: Although contract trading can bring high profits, it also comes with significant risks. Remember to stay calm and do not make emotional decisions due to short-term market fluctuations.
Use leverage wisely: Leverage can amplify your gains, but it can also exacerbate losses. It is recommended that beginners do not recklessly use high leverage and maintain moderate leverage.
Diversify investments: Avoid putting all your funds into one contract; appropriately diversify your investments to reduce the risk of a single contract.
Learn technical analysis: Contract trading requires some basic technical analysis skills, such as reading candlestick charts, support and resistance levels, etc. Learning these can help you better predict market movements.
Today's beginner's guide to contract trading ends here! I hope you can gain a clearer understanding of Bitcoin futures, perpetual contracts, and contract trading through this tutorial and successfully start trading contracts on Binance.