Recently, I’ve noticed many beginners in the community still feel a bit confused about the basic concepts of contract trading, especially terms like opening and closing positions. I’d like to share my understanding in hopes of helping everyone avoid some detours.

Honestly, when many people first enter the crypto space, they get confused by these professional terms. In fact, these three concepts are simply the three stages of trading. Opening a position means you decide to enter the market, buying or selling a certain cryptocurrency to establish a position. If you’re bullish, you buy to open a long position; if bearish, you sell to open a short position. At this point, you need to prepare margin to cover potential losses.

Then comes the holding stage. You already have a position in hand, and now you’re waiting for the market to move in your expected direction. During the holding period, your profit or loss will fluctuate with the price. If it’s a long position, the price rising means profit, and falling means loss. The opposite applies to a short position.

The most crucial part is closing the position, which simply means you decide to end this trade. When the price reaches your target or market conditions make you feel it’s time to exit, you close the position. Closing a long position means selling; closing a short position means buying back. This step determines your final profit or loss.

How exactly is it calculated? The opening cost is the opening price multiplied by the trading amount. When closing, if it’s a long position, profit or loss equals (current price minus opening price) times the trading amount. For a short position, it’s (opening price minus current price). The floating profit or loss during the holding period is calculated with the same logic.

My experience is that the biggest mistake beginners make is not knowing when to close their positions in time. Sometimes they make a little profit but don’t know whether to exit, and as a result, the market reverses and they suffer losses. Sometimes they suffer losses and stubbornly hold on, hoping to recover. In fact, the core of closing a position is actively managing risk, not passively waiting.

Deciding when to open and close positions based on market conditions and your risk tolerance is very important. I recommend everyone try small amounts on Gate first to get familiar with these operations. Once you truly understand the three stages of opening, closing, and holding a position, contract trading will become much simpler.