How to calculate MEXC contract returns

Accurately calculating contract returns on MEXC is pivotal for maximizing profits and minimizing losses, enabling traders to make informed decisions based on fluctuations in the underlying asset's price.

Nov 11, 2024 at 10:22 pm

How to Calculate MEXC Contract Returns

MEXC, a leading cryptocurrency exchange, offers a wide range of contract trading options, allowing users to speculate on the future price of cryptocurrencies. Calculating the returns on these contracts can be a complex process, but understanding the methodology is crucial for effective trading. This comprehensive guide provides a step-by-step explanation of how to calculate MEXC contract returns, empowering traders with the knowledge and tools they need to maximize their trading profits.

Step 1: Determine Your Initial Position

The first step in calculating your contract returns is to determine your initial position. This includes identifying the type of contract you traded (futures or perpetual), the underlying asset, the contract size, and the entry price.

• Futures contracts have an expiration date and are settled at a specific future point in time.
• Perpetual contracts do not have an expiration date and are continuously traded, allowing for open-ended positions.

The contract size represents the number of units of the underlying asset underlying asset (e.g., BTC, ETH) that each contract represents.

The entry price is the price at which you opened your contract position. It serves as the baseline for calculating your returns.

Step 2: Calculate the Contract Value

Once you have defined your initial position, you can calculate the contract value. The contract value is simply the product of the contract size and the current market price of the underlying asset.

Contract Value = Contract Size x Current Market Price

For example, if you hold a BTC futures contract with a size of 1 BTC and the current market price of BTC is $20,000, your contract value would be $20,000.

Step 3: Track Price Fluctuations

As the market price of the underlying asset fluctuates, the value of your contract will change accordingly. Tracking these price fluctuations is essential for calculating your returns.

• If the price of the underlying asset rises, the value of your contract will increase proportionally.
• If the price of the underlying asset falls, the value of your contract will decrease proportionally.

Step 4: Determine Your Exit Price

The exit price is the price at which you close your contract position. When you close out your position, your profit or loss is realized.

Your exit price can be different from your entry price, depending on the direction and extent of the price movement.

Step 5: Calculate Your Contract Profit or Loss

With your entry and exit prices determined, you can now calculate your contract profit or loss. The profit or loss is simply the difference between the contract value at exit and the contract value at entry.

Contract Profit or Loss = Contract Value at Exit - Contract Value at Entry

A positive value indicates a profit, while a negative value indicates a loss.

Step 6: Account for Trading Fees

Trading contract involves fees, such as trading commissions and funding fees. These fees need to be factored in to determine your net profit or loss.

• Trading commissions are charged by MEXC for executing your trades.
• Funding fees are paid or received by traders based on the funding rate of a contract.

Step 7: Calculate Your Return on Investment (ROI)

The return on investment (ROI) is a key metric used to measure the profitability of your contract trade. It represents the percentage gain or loss you have made on your initial investment.

ROI = (Contract Profit or Loss / Initial Investment) x 100%

A positive ROI indicates a profitable trade, while a negative ROI indicates a loss-making trade.

Step 8: Analyze and Adjust Your Trading Strategy

After calculating your returns, it is important to analyze the factors that influenced your performance. This includes identifying the market conditions, your trading decisions, and any areas for improvement.

By understanding the steps involved in calculating MEXC contract returns, traders can effectively manage their positions, maximize profits, and minimize losses. This comprehensive guide provides a solid foundation for profitable contract trading on the MEXC platform.