To help you better understand the concept, here are the definitions of trading terms you need to know.
1. Crypto Contract
Crypto contract is a cryptocurrency derivative. Koinpro offers 4 types of contracts including “Perpetual Contract”, “Double Contract”, “Commodity” and “Index”. The trading of these contracts is called “Margin Trading”.
2. Margin Trading
When trading crypto contracts, you only need to pay in proportion instead of full amounts.
For example, if you want to trade a “Bitcoin perpetual contract” (contract pair: BTC/USDT), say the current price is $8,000, instead of paying $8,000, you only need to pay a portion, like $80, you can buy “1 bitcoin” worth of bitcoin contract.
3. Open a Position; Buy/Long & Short/Sell
a)“Open a position”: The action to start trading crypto contract, for example, you can open a position with buying a “BTC/USDT”.
b)“Close a position”: The transaction that is the opposite of an open position. If you open with buying, then close the position means selling.
c)Buy/Long: You can open a position with “Buy/Long”, it means, you purchased the bitcoin (or other currency) with the expectation that it will go up.
d)Short/Sell: You can also open a position with “Short/Sell”, which means, you want to sell the bitcoin first and buy back later because you think it will go down.
4. “Margin”, “Contract Value” and “Leverage”
Margin: When trading crypto contracts, you will be asked to pay a small amount of capital, the capital is called “margin”. It is the money required to open a position.
Contract Value: The value of the position you opened. For example, you buy a BTC/USDT perpetual contract, the contract value is 1BTC. It means you are holding a position worth of 1BTC.
Leverage: The leverage describes the ratio of margin to contract value. For example, 100x leverage means, to open a position worth of 1BTC, you will need 1/100 of 1BTC as margin. If the leverage is 50x, the margin is 1/50 of 1BTC.