How to trade MEXC contracts

By selecting the right trading pair, setting up a funded trading account, and implementing effective risk management strategies, traders can maximize their returns while minimizing risks when contract trading on MEXC.

Nov 09, 2024 at 03:43 am

A Comprehensive Guide to MEXC Contract Trading: Maximizing Returns with Leverage

Introduction

MEXC, a reputable cryptocurrency exchange, offers a comprehensive contract trading platform that allows traders to leverage their positions and amplify their potential profits. Understanding the nuances of contract trading is crucial for optimizing returns while minimizing risks. This extensive guide will provide a step-by-step walkthrough on how to trade MEXC contracts effectively.

Step 1: Understanding Contract Types

MEXC offers two primary contract types: Inverse Perpetual Contracts and Linear Perpetual Contracts.

Inverse Perpetual Contracts:

• Inverse contracts are settled in the underlying asset (e.g., BTC, ETH).
• Traders speculate on the price of the underlying asset relative to USDT.
• The profit-loss mechanism is straightforward, where profits are realized as the price moves in the trader's favor.

Linear Perpetual Contracts:

• Linear contracts are settled in USDT.
• Traders speculate on the price of the underlying asset, but the settlement is always in USDT.
• Linear contracts feature a "Funding Rate" mechanism that incentivizes traders to keep the contract price aligned with the spot market.

Step 2: Choosing the Right Trading Pair

MEXC offers a wide range of trading pairs for both Inverse and Linear contracts. Selecting the right pair involves considering factors such as:

• Market Volatility: Choose pairs with high volatility to maximize potential profits.
• Trading Volume: Choose pairs with ample liquidity to ensure smooth order execution.
• Slippage: Consider pairs with low slippage to minimize order execution costs.

Step 3: Setting Up a Trading Account

To trade MEXC contracts, you'll need a funded trading account:

• Create an account on the MEXC website or mobile app.
• Complete the identity verification process to unlock full trading features.
• Fund your account using supported cryptocurrencies or fiat currencies.

Step 4: Understanding Brokerage Fees

MEXC charges brokerage fees for contract trading:

• Maker Fee: A fee paid by liquidity providers who add liquidity to the order book.
• Taker Fee: A fee paid by liquidity takers who execute trades against existing orders in the order book.
• Funding Fee: A periodic fee adjusted to incentivize traders to keep the contract price aligned with the spot market (only applicable to Linear contracts).

Step 5: Placing an Order

Once your trading account is set up, you can place orders on the MEXC contract trading platform:

• Market Order: An order that is executed at the current best available price.
• Limit Order: An order that is placed at a specified price. It is only executed when the market price reaches that level.
• Stop-Limit Order: A combination order that triggers a limit order when a specific trigger price is reached.

Step 6: Managing Risk

Contract trading involves significant risk, and it's crucial to implement effective risk management strategies:

• Position Sizing: Determine an appropriate position size based on your risk tolerance, account balance, and market volatility.
• Stop-Loss Orders: Place stop-loss orders at predetermined levels to limit potential losses.
• Hedging: Diversify your portfolio and mitigate risk by using hedging strategies.

Step 7: Monitoring Positions

Regularly monitor your open positions to adjust them as per market conditions:

• Unrealized Profit/Loss (PnL): Track your PnL to monitor potential profits or losses.
• Margin Utilization: Ensure