So whether you're just starting out in futures trading or you've been trading for years and want to improve your performance, read on to learn everything you need to know!
What Are Perpetual Futures?
Perpetual futures trading involves holding a position in a futures contract for an extended period of time. The goal is to profit from the price movements of the underlying asset. Unlike options, there is no expiration date.
In crypto perpetual trading, the underlying asset could be bitcoin, ethereum, doge, solana and many more. Perpetual futures allow investors to speculate on the price index of an underlying asset. Crypto futures are traded on exchanges like regular financial markets, except that the indexes are on the blockchain.
What Are Perpetual Swaps?
A perpetual swap is a contract that allows two counter parties to make trades at a specific future date and time. They are an effective hedging tool, as they allow investors to participate in markets.
Perpetual swaps can also be used as agreements between two parties where each agrees to pay the other a fixed amount of money at regular intervals, irrespective of the direction of the market. This makes them versatile and useful for both short-term and long-term trading purposes.
How Do Perpetual Futures Work?
Understanding how perpetual futures work is essential to making informed decisions. Perpetual futures are derivatives that allow investors to speculate on the future price of a commodity or security. The profit comes from earning money on the difference between what was paid for purchasing the contract and what is sold later.
Crypto futures contracts are one of the most sought after investment strategies by experienced traders. Futures contracts involve a high degree of risk, but its benefits are also significant. Traders can make excellent profits when the right techniques and strategies complement their trading. Here are some of the terms you need to know before going into the world of crypto perpetual trading.
Terminology in Perpetual Futures Trading
Some of the important terms that you need to know before you start:
True Value of a Perpetual Futures Contract
Perpetual futures contracts are often used by traders who want to take a prediction of a position on the future price of an asset but don't want the hassle of constantly renewing their contract. Since there is no expiration date, traders can hold their position for as long as they want without having to worry about the contract expiring.
While perpetual futures contracts offer many advantages, they also come with some risks. First, because there is no expiration date, it's possible for one party to unilaterally terminate the contract at any time. This could leave the other party in a difficult situation if they were counting on the contract to be fulfilled. Second, because there is no set expiration date, it's also possible for the price of the underlying asset to fluctuate wildly over time, which could lead to losses from the set position.
Cost of carry
The cost of carry is the expense incurred to maintain a position over time. In the context of perpetual futures contracts, the cost of carry refers to the fees charged by exchanges for funding and maintaining open positions. These fees can eat into your profits if not managed properly.
To make your perpetual futures trading profitable, it is important to understand the cost of carry and how it affects your bottom line. With this knowledge, you can manage your positions and costs in a way that maximizes your chances for success.
Volatility refers to the amount of risk associated with a given security. In the case of perpetual futures, higher volatility means greater price fluctuations and more potential for profit or loss.
Margin is the amount of money required to open and maintain a position. Perpetual futures contracts are traded on margin, meaning that only a small percentage of the total contract value needs to be deposited in order to open a position. This allows traders to take on larger positions than they could otherwise afford, but it also increases the risk of losses if the market moves against them.
Leverage allows traders to control a larger position than they would otherwise be able to afford, magnifying both profits and losses. It's important to use leverage responsibly and not over-leverage your account, as this can lead to unnecessary liquidation of your position due to volatility. Crypto exchanges, like C-trade, offer 150x leverage to help users trade more effectively.
By understanding these three key concepts, traders can better manage their risk and maximize their chances for success in the world of perpetual futures trading.
How to Profit from Perpetual Futures Trading?
Before we dive in, you should understand how the market works, how the volatility affects your positions and what orders to place. Here are a few things to keep in mind:
- Be aware of the potential price decay. This happens when the price of the underlying asset falls below the level at which you bought it. To offset this, you can either buy multiple contracts or use a stop-loss order.
- Be aware of the costs associated with holding a futures contract. These include storage fees, financing costs or other transaction fees. You can offset these costs by selling your position before they become too expensive.
- The trader should also keep an eye on the global market news and trends as they would affect the fluctuation and movement of the index, hence affecting your positions.
- A trading strategy should be based on technical analysis or some other form of objective market analysis. It is also important to have risk management rules in place to protect your capital.
Where to trade perpetual contracts
There's no doubt about it - trading perpetual contracts can be a lucrative proposition, but to make the most out of it, please do your own research. After all, not all platforms are offering the same service. It is important to select the right platform for your trading needs.
Still Looking For a Broker You Can Trust?
Futures trading is a complex and highly-risky market, which is why it's important to find a broker you can trust. It can take some time to find the right one, but once you've found a solid broker, be patient and stick with them.
C-Trade offers Bitcoin Perpetual with 150x leverage. The platform also supports XRP and Ethereum trading. A distinctive feature of C-Trade is its ability to process 10 million TPS, assuring your order is speedy enough to land your profits. Additionally, the exchange platform uses machine learning to detect manipulation, so you can keep your investments safe.
If you want to make your perpetual futures trading profitable, there are a few things you can do. First, make sure you have a clear understanding of the markets you're trading in and the underlying factors that affect price movements. Second, develop a solid trading strategy and stick to it. Third, don't be afraid to use leverage to your advantage. And finally, always remember to manage your risk wisely.
Disclaimer: This content is not financial advice, please do your own research before investing.