Investors who are new to the currency market often encounter a situation where their trades are profitable, but when they close or settle, it shows a loss. They panic and ask, "Where's the money? Why is there a loss after closing when the futures clearly have profits? Your company is outrageous!" Ultimately, this stems from a misunderstanding of futures trading. The reason is that the settlement system simply moves the profits to different days and does not affect the final result. Regardless of how many days you hold, or how the settlement occurs in between, the final profit or loss is always the closing price minus the opening price multiplied by the quantity. Next, I will explain this in detail.
OKX_ Global Digital Currency Trading Platform, click the link below to register on the OKX exchange official website and get a blind box reward of 10,000 USDT!
OKX registration link: https://www.okx.com/join/OK234
Huobi / Binance / OKX Android APP download: https://688li.com/
Binance registration link: https://www.binance.com/zh-CN/join?ref=587926281
Why is there a loss after closing when futures clearly have profits?
The futures market implements a same-day no liability system, which can be simply understood as an issue with the settlement price of futures. Although the system shows a negative number upon closing, the overall profit and loss of the account remains unchanged. Profit is profit, and loss is loss; it’s just the way it is displayed that differs. The situation where the account shows "incorrect" profit and loss upon closing only reflects in the next day's trading; this situation does not exist in intraday trading.
For example, suppose the total funds in the account are 10 yuan, and you bought 1 commodity futures, occupying 10 yuan. Let’s say the current price is 10, and you go long at 10. The closing price is 11 yuan. In this case, the total funds in the account should only be 11 yuan at closing. However, futures are settled at the settlement price, and the settlement price for that day is 15 yuan, so the total funds will show as 15 yuan at settlement (at this point, it’s as if the account gained an additional 4 yuan).
When the market opens the next day, it also opens at 11 yuan, and at this position, you close your position. At this time, the account shows a closing profit and loss of -4 yuan, but your total funds remain unchanged at 11 yuan. This -4 is derived from your closing price of 11 yuan minus yesterday's settlement price of 15 yuan.
To summarize, this situation is equivalent to the settlement price being overstated by a few yuan that day, and then being adjusted back the next day. The overall profit and loss situation remains unchanged. The principle of why there is a loss after closing when futures clearly have profits is the same.
What are the characteristics of cryptocurrency futures?
The characteristics of cryptocurrency futures include contract duration, underlying assets, the ability to use leverage, both long and short positions, and predicting future prices. Specific characteristics can be referenced in the following aspects:
-
Contract duration: Futures contracts set a specific expiration date, usually on a certain day of each month. The contract automatically terminates on the expiration date, and traders can choose to close their positions before expiration or roll them over to the next contract cycle.
-
Underlying assets: The underlying asset of the contract is a specific cryptocurrency, such as Bitcoin or Ethereum. Traders do not actually purchase or hold these cryptocurrencies but only trade on the contract.
-
Leverage: Cryptocurrency futures allow traders to use leverage, meaning they can control a larger amount of cryptocurrency with less capital. This means investors can achieve higher returns but also face higher risks.
-
Long and short positions: Futures contracts allow traders to trade with a bullish (long) or bearish (short) stance. Long positions expect the price of the underlying asset to rise, while short positions expect the price to fall.
-
Price discovery: Due to the large participation of traders in the futures market, the prices of futures contracts reflect the market's expectations for future cryptocurrency prices to some extent.
I hope the above content helps everyone understand the issue of why there is a loss after closing when futures clearly have profits. It is important to emphasize that while the goal of trading cryptocurrency futures is to conduct profitable trades and maximize profits, futures trading carries high risks, and the market is highly volatile, which may lead to losses. Before engaging in futures trading, it is advisable to fully understand the market, risk management, and trading strategies, and to carefully consider your investment goals and risk tolerance. It is not recommended to engage in futures trading without sufficient knowledge and experience. If you have any questions, it is best to consult a professional financial advisor or broker.
More tags to read: Futures profit and loss after closing
Related articles
2024 Binance Simple Registration and Usage Guide (For Mainland China Only)
95% of cryptocurrency futures traders have fallen into the trap: the secret of having profits but still incurring losses!
95% of cryptocurrency futures traders encounter the problem: having profits but still incurring losses. The reason is that the settlement system settles profits to different dates, which does not affect the final result. The futures market implements a same-day no liability system, and the settlement price determines profit and loss.