BingX Contract Beginner Tutorial

Crypto derivatives contracts are financial instruments that derive their value from the underlying asset, such as cryptocurrencies, and represent an agreement between two parties to exchange an asset at a predetermined price in the future.

Nov 25, 2024 at 10:28 am

BingX Contract Beginner Tutorial

Welcome to the comprehensive BingX contract beginner tutorial, designed to empower aspiring traders with the foundational knowledge and guidance necessary to navigate the dynamic world of crypto derivatives trading. This tutorial will delve into the intricacies of contract trading, from the basics to advanced concepts, equipping you with the skills to make informed decisions and potentially maximize your trading profitability.

Step 1: Understanding Crypto Derivatives Contracts

What are Crypto Derivatives Contracts?

Crypto derivatives contracts are financial instruments that derive their value from the underlying asset, in this case, cryptocurrencies. These contracts represent an agreement between two parties to exchange an underlying asset at a predetermined price and date in the future. Unlike spot trading, where you directly buy or sell cryptocurrencies outright, contract trading involves speculating on the price fluctuations of these assets without actually owning them.

Step 2: Types of Contract Trading

1. Futures Contracts:

Futures contracts are standardized agreements that obligate the buyer to purchase or the seller to deliver a specific amount of an underlying asset at a set price on a specified future date. They provide a way to hedge against price risks, speculate on price movements, or lock in future prices for physical delivery.

2. Perpetual Contracts:

Perpetual contracts, also known as perpetual swaps, are similar to futures contracts, but they do not have a fixed expiry date. This allows traders to hold positions indefinitely and adjust their margins as needed. They aim to mimic the spot market price but with increased leverage and flexibility.

Step 3: Understanding Margin Trading

1. Leverage:

Margin trading involves trading with borrowed funds, amplifying your trading power and potential profits. However, it also magnifies potential losses. Leverage is expressed as a ratio, indicating the amount of funds you can borrow relative to your deposited margin.

2. Margin:

Margin refers to the minimum amount of funds required to maintain your leveraged position. It acts as a collateral to cover potential losses. Insufficient margin can lead to a margin call, forcing you to add more funds or liquidate your position.

Step 4: Placing Orders

1. Market Order:

A market order executes immediately at the best available market price. It provides instant order fulfillment but may result in price slippage, especially during high volatility.

2. Limit Order:

A limit order specifies a specific price at which you want to buy or sell a contract. It only gets executed if the market price reaches or surpasses the set limit price. Limit orders offer more control over the execution price but may not get filled promptly, particularly in fast-moving markets.

Step 5: Managing Risk

1. Stop-Loss Orders:

Stop-loss orders are designed to limit potential losses by automatically closing your position if the market price moves against you beyond a predefined trigger point. They help protect your capital from substantial drawdowns.

2. Taking Profit Orders:

Take-profit orders are used to secure profits by automatically closing your position when it reaches a target profit level. They allow you to lock in gains and avoid the potential of giving back profits due to market reversals.