CoinEx | Improve Your Trading Experience Using the Contract Calculator
In the volatile crypto market, your contract revenue is affected by every fluctuation. At the time, contract leverage multiplies the size of your profit/loss. As such, a tool that offers a straightforward overview of PNL status is vital to contract trading. To meet such demand, CoinEx launched the Contract Calculator in July 2021. With this new feature, users can simulate the result of contract trading and better manage their position to lock in profits.
After entering www.coinex.com/perpetual, you can find the Calculator right beside Futures introduction on the futures page. The tool offers three functions: the calculation of revenue & PNL%, the target price, as well as the liquidation price.
User A believes that the BTC price will rise and plans to long BTC via linear futures contracts (USDT-margined). Suppose the current BTC price stands at 40,000 USDT. He spent 4,000 USDT on 1 BTC at 10x leverage. When the price rises to 45,000 USDT, he could then sell the crypto for a profit of 5,000 USDT. However, if he bought BTC through spot trading, the profit would only be 500 USDT.
Of course, you can also focus on the ideal revenue, and calculate the target price that would help you record such revenue with the help of the Calculator.
In the above example, what User A did is called starting a “full position”, which means that all assets available in his account were used for opening the order. Once the available margin becomes insufficient, the position will be liquidated (forced liquidation). That said, how much should we spend on a position? What is the ideal amount of the available margin? The answer to these questions lies in the risks one could bear.
For another instance:
User B thinks that the BTC price will drop and plans to short BTC via linear futures contracts (USDT-margined). Suppose the current BTC price stands at 40,000 USDT. He spent 4,000 USDT out of the 12,000 USDT he holds shorting 1 BTC at 10x leverage. In this case, User B’s open price is 40,000 USDT, his position amount is 1 BTC, and the available margin stands at 8,000 USDT (12,000–4,000). Using the Calculator, he would notice that the position will be liquidated when the BTC price rises to 47,800 USDT.
Transaction fees are not included in the above calculation; the results are for reference only.
The larger the amount of available margin there is, the less likely forced liquidation will occur. In contract trading, we often hear that someone just added a certain amount of USDT. Essentially, he/she is simply adding more position margin to mitigate the liquidation risk. Of course, many traders may not have the extra margin needed to maintain their position, which is also why we recommend setting a low leverage ratio when starting the position. In addition, a high initial margin is not advised either.
Normally, it is safer to set the initial margin at below 10% of the total assets for the position.At last, neither the Calculator nor any other tool can make people less greedy. Therefore, it is essential to stop the loss in time, and not every order can be maintained by constantly adding more margin. In contract trading, which comes with both high risks and high returns, most profit makers are rational investors, while irrational investors who are taken over by greed will most likely end up losing.
* The above content may not be relied on as any investment advice.