CoinEx | Terms of Contract Trading You Should Learn Before Opening an Order

What is contract trading?

Contract trading is a kind of crypto derivatives that falls into the category of futures. Conventional spot trading appeared as early as the end of the 19th century when sellers deliver actual goods upon the payment by buyers. In traditional futures trades, which evolved from spot trading, the buyer and the seller enter into a contract after the price and date are agreed on, and the two will transfer the ownership of the contracted goods upon the specified date and settle the payment.

What makes contract trading so popular (particularly in bear markets)?

Bluntly put, in spot trading, you favor a cryptocurrency and then invest in it. When the price of the crypto rises, you sell it for profit. When the price falls, you can only wait for it to surge. In other words, there is only one way to make money. Though this approach works in a bull market, once the market becomes depressed, you can only hold onto the cryptos you bought and watch them diminish in value. Contract trading, on the other hand, offers the possibility of earning profits despite market swings. Of course, a new way to earn also comes with higher risks. As such, we must fully understand contract trading to minimize the risks and maximize the returns.

Opening a position

Having decided which approach to adopt, you’ll then need to buy/sell futures/contracts to open your position or let it remain vacant. If there is no major bear/bull signal, we recommend starting from a small investment/position.

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