[Bitcoin] Must read before starting futures trading

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1. Futures Trading

2. Essential terms

3. Revenue

4. Leverage ​

 

1. What is Futures Trading?

The difference between spot and futures is time.

 

Spot is currently trading with the counterparty to buy and sell goods. Over time, you can make a profit when the price of an item rises, or you can lose money as its price falls.

 

Futures contract at a specific price at a specific point in time in the future. For example, a merchant and a farmer agreed to a contract to trade 1 kg of rice at 2,000 won a month later, but the price of rice plummeted to 1,000 won per 1 kg. However, according to the contract, the merchant must buy it at 2000 won for 1 kg. The merchant loses $1,000. Conversely, if the price rises by 3,000 won, you will make a profit of 1,000 won.

 

Futures trading is profitable from these trades. The difference with spot is that you can bet on a decline.

 

 

2. Essential terms

Positions	A few contracts at a specific price just like real futures trading
long/short	If you take a long position, profit if it rises, loss if it goes down If you take a short position, profit if it goes down and loss if it goes up.
Leverage	Increase the position ratio by the amount of leverage
margin	This is the amount required to maintain the position, and it is liquidated when the balance in the wallet falls below the margin. Naturally, the larger the position size, the larger the required margin size.
PNL (Unrealized Revenue)	It can be thought of as the current profit before position reorganization. + means profit, - means loss.
clearing	Usually, when the balance of the wallet falls below the margin due to PNL -, the clearing house (exchange) forcibly closes the position so that the trader's account does not become negative.
Funding Fee	In the case of an indefinite product, a position can be taken permanently, which causes no settlement and does not match the spot price index. In order to match the spot price index, when the number is positive, the long side gives a funding fee to the short side, and when it is negative, the short side gives a funding fee to the long side.

 

3. Revenue

PNL is determined solely by margin and position quantity.

 

 

4. Leverage

You should know that derivatives are risky. You can buy and hold the spot unless you sell it, but derivatives have a loss of principal unlike spot trading. And because you can invest in both directions, you are open to more investment opportunities, which means you are more exposed to risk. Although you can maximize your profits through leverage, you should keep in mind that bad investments can result in more losses.

 

When you increase your leverage, your balance goes up by the amount of your leverage. That way you can get more positions.

 

 

The important point here is that the money in the wallet seems to have increased, but the nominal value of the wallet increases, but the actual wallet balance remains the same. Therefore, if you hold a high multiplier and high position, the margin (collateral) becomes very large, and the actual wallet balance is insufficient compared to the margin, so the liquidation price is low, which is very risky, and liquidation may occur in a few ticks. That's why you need to strategically adjust the position size even if you have a high magnification.

 

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