The three core elements of Futures Trading are the leverage mechanism, Margin system, and funding rate. The five details include contract type selection, platform selection, Position management, take profit and stop loss settings, and emotional management. Below is a specific introduction:

Three Core

• Leverage Mechanism: Leverage is a key feature of Futures Trading, allowing traders to control larger Positions with a smaller amount of capital. For example, with 10x leverage, a trader only needs to invest 10% of the Margin to achieve a Position size equivalent to 10 times the initial capital. While leverage amplifies profits, it also magnifies losses, so choosing the leverage ratio wisely is an important aspect of risk management.

• Margin System: Includes initial margin and maintenance margin. The initial margin is the minimum margin ratio that must be met when opening a position, while the maintenance margin is the minimum margin level that must be maintained in the account during the position holding period. If it falls below this level, it may trigger liquidation, resulting in the position being forcibly closed.

• funding rate: This is a mechanism unique to perpetual contracts, settled every 8 hours. When the contract price is higher than the spot price, longs have to pay fees to shorts, and vice versa. The positive or negative funding rate reflects the bias of market sentiment, allowing traders to assess the strength of long and short forces.

Five details

• Contract type selection: Common types include delivery contracts and perpetual contracts. Delivery contracts have a fixed expiration date, and upon expiration, the system will forcibly close positions based on the average price in the last hour, suitable for those needing to hedge spot risk; perpetual contracts have no expiration limit and adjust price deviations through funding rates, making them suitable for short-term traders. Additionally, there are USDT-denominated and crypto-denominated contracts, the former settled in USDT for more intuitive risk, while the latter uses BTC as margin, providing a natural hedge against inflation.

• Choice of trading platform: Priority should be given to top exchanges such as Binance and OKX, as these platforms have higher security, liquidity, and stability, ensuring the smooth execution of trades and reducing risks associated with platform issues.

• Position Management: Follow the iron rule of capital management, such as not exceeding 5% of total capital for a single trade, beginners are advised to use 2-5 times leverage, and experienced traders should not exceed 20 times leverage, etc., to avoid excessive positions leading to uncontrolled risk.

• Take profit and stop loss settings: Reasonable take profit and stop loss are important means to ensure profits and control losses. For example, the stop loss can be set at 30% of the margin loss, and the take profit can be set to reach a preset target, such as the first take profit level at 15%-20%, reducing the position by 50%, and the second take profit level at 30%-50%, liquidating the position, etc.

• Emotion Management: Stay calm and rational during trading, avoid blindly following trends and emotional trading. Strictly adhere to the trading plan, not swayed by emotions such as fear and greed, and achieve unity of knowledge and action.