How to play MEXC delivery contracts

By understanding the mechanics, complexities, and risk-reward dynamics of MEXC delivery contracts, traders can potentially capitalize on cryptocurrency price fluctuations while also managing their risk exposure effectively.

Nov 08, 2024 at 12:44 pm

Understanding MEXC Delivery Contracts

MEXC delivery contracts are financial instruments that allow traders to speculate on the future price of a cryptocurrency asset. Unlike other types of cryptocurrency contracts, such as spot or futures contracts, delivery contracts result in the physical delivery of the underlying asset at the expiration date. This guide provides a comprehensive overview of how to play MEXC delivery contracts, covering onboarding, contract selection, trading mechanics, and risk management.

Onboarding

1. Create a MEXC Account: Register on the MEXC platform by providing personal and contact information. Verify your identity to unlock advanced trading features.
2. Fund Your Account: Transfer funds from your external crypto wallet or purchase cryptocurrencies directly on MEXC using fiat currency. Supported funding methods include credit/debit cards, wire transfers, and third-party payment platforms.
3. Understand the MEXC Interface: Navigate the MEXC trading platform, familiarizing yourself with different sections and tools. The delivery contract interface displays contract details, real-time price charts, and order books.

Contract Selection

1. Choose Your Asset: MEXC supports a wide range of cryptocurrencies for delivery contracts, including Bitcoin, Ethereum, and altcoins. Research and select the asset you want to speculate on.
2. Select Contract Parameters: Delivery contracts have specific parameters, including contract size (the amount of the underlying asset), expiry date (when the contract expires), and leverage (the ratio of borrowed funds to your initial margin). Carefully consider these parameters based on your trading strategy.

Trading Mechanics

1. Placing Orders: Traders can place buy or sell orders for delivery contracts. Buy orders speculate on a price increase, while sell orders bet on a price decrease. Orders can be Market (executed at the current market price), Limit (executed at a specified price), or Stop (triggered when the price reaches a certain level).
2. Monitoring Positions: Once orders are placed, traders can monitor their positions in real-time. The MEXC platform provides a range of tools for tracking profit/loss, open interest, and average entry price.
3. Settlement and Delivery: At the expiration date, delivery contracts are settled. If the trader holds a long position (bought the contract), they must pay the delivery price for the underlying asset. Conversely, if the trader holds a short position (sold the contract), they must deliver the underlying asset.

Risk Management

1. Understanding Leverage: Leverage can magnify potential profits but also increase the risk of loss. Traders must carefully evaluate their risk tolerance and use leverage responsibly. MEXC offers a range of leverage options, from conservative to aggressive.
2. Managing Margin: Margin refers to the collateral that supports your trading position. Adequate margin ensures that your position can withstand adverse price movements. Monitor your margin balance and top up as necessary to avoid a margin call.
3. Stop-Loss and Take-Profit Orders: Stop-loss and take-profit orders help traders limit their potential losses and lock in profits. Stop-loss orders trigger when the price falls below a certain level, while take-profit orders trigger when the price rises above a certain level.
4. Hedging Strategies: Traders can employ hedging strategies to reduce their exposure to risk. This involves taking positions in multiple correlated or uncorrelated assets or using options to offset potential losses.

Example

A trader believes that the price of Bitcoin will rise in the next week. They choose to buy a Bitcoin delivery contract with a contract size of 1 BTC, an expiry date of next week, and a leverage of 5x. The trader places a market buy order for 0.5 contracts, committing 0.1 BTC as initial margin. If the trader's prediction is correct and the price of Bitcoin rises by 10%, they will make a profit of (0.5 x 1 BTC x 10%) x 5 = 0.25 BTC. However, if the trader's prediction is incorrect and the price of Bitcoin falls by 10%, they will lose (0.5 x 1 BTC x 10%) x 5 = 0.25 BTC.