Newcomers to the crypto world are most afraid of a bunch of technical terms that make their heads spin, especially the three concepts in contract trading: opening a position, closing a position, and holding a position. Many people jump in without fully understanding, ending up losing everything. Today, I’ll explain these things simply, especially the meaning of closing a position, as many people actually don’t grasp it thoroughly.

First, let’s talk about opening a position. Opening a position means establishing a new trading stance in the market; simply put, it’s starting a trade. If you believe a certain coin will go up, you buy in—that’s called opening a long position. Conversely, if you think it will go down, you sell—that’s opening a short position. When opening a position, you need to pay margin, which is used to ensure you can cover potential losses.

Next is the meaning of closing a position. Closing a position means shutting down your existing position, ending that trade. If you previously opened a long position (bought), closing it means selling; if you opened a short position (sold), closing it means buying back. The purpose of closing a position is to lock in profits or cut losses, preventing losses from growing further. Many newcomers don’t really understand how important closing a position is; in fact, it’s the core of risk management.

Holding a position means you are currently maintaining that stance. After opening and before closing, your position is in a holding state. The profit or loss of the holding will fluctuate with the coin’s price, and at this point, you haven’t locked in the final result, so the risk still exists.

Calculations are also straightforward. The cost of opening a position is your opening price multiplied by the trading amount. If you opened a long position, the profit or loss upon closing equals (current price minus opening price) times the trading amount; for a short position, it’s the opposite—(opening price minus current price) times the trading amount. The profit or loss of the holding is calculated the same way as closing, only using the real-time price instead of the closing price.

In simple terms, mastering the concepts of opening, closing, and holding a position mainly depends on understanding how crucial closing a position is. Timely opening and closing can help you effectively manage risk and achieve profits. However, a reminder: the timing of opening and closing should be based on market conditions and your own risk tolerance—never operate blindly. Controlling risk well is the key to surviving long-term in the crypto space.