Bybit perpetual contract trading rules

Perpetual contracts, akin to perpetual futures, are financial instruments mirroring the behavior of futures contracts but eternally persisting without an expiration date, enabling traders to indefinitely maintain speculative positions.

Nov 12, 2024 at 09:06 am

Step 1: Understanding Perpetual Contracts

• Perpetual contracts, also known as perpetual futures, are financial instruments that simulate the behavior of futures contracts without having an expiration date.
• They derive their value from an underlying asset, but unlike traditional futures, they do not require delivery of the underlying asset upon contract expiration.
• Perpetual contracts allow traders to maintain their speculative positions indefinitely or until they decide to close them.

Step 2: Key Features of Bybit Perpetual Contracts

• Leverage: Bybit offers maximum leverage of up to 100x, allowing traders to amplify their potential returns with borrowed capital. However, leverage should be used cautiously, as it can magnify losses if the market moves against you.
• Funding Rate: Perpetual contracts incur a funding rate, which is a small fee or premium paid by traders who maintain long or short positions relative to those who do not.
• No Expiration: Traders can maintain their perpetual contract positions indefinitely, without the need for periodic contract roll-overs as seen in traditional futures markets.
• Mark Price: Bybit uses a Mark Price system that determines a fair market value for the underlying asset. This price is used for margin calculations and order execution.

Step 3: Order Types and Execution

• Limit Order: Allows traders to specify a desired price at which their order will be executed. Limit orders provide more control over execution price but are not guaranteed to fill.
• Market Order: Executes an order at the current market price, ensuring immediate fulfillment but without precise price control.
• Stop Order: Triggers a market order when the specified trigger price is reached, protecting traders from adverse market conditions.
• Trailing Stop Order: A dynamic stop-loss order that follows the prevailing market price, safeguarding profits while minimizing losses.

Step 4: Margin Management and Risk Mitigation

• Initial Margin: The required margin to open a perpetual contract position, which acts as collateral against potential losses.
• Maintenance Margin: The minimum margin that must be maintained to avoid liquidation. If your margin falls below this level, your positions may be forcefully closed by the exchange.
• Liquidation: Occurs when your equity value, including available margin and unrealized profit/loss, falls below the maintenance margin requirement.
• Partial Liquidation: A mechanism that allows the exchange to close only a portion of your position in case of insufficient margin, minimizing the impact on your account balance.

Step 5: Advanced Trading Features

• Conditional Orders: Combine multiple order types within a single order execution, such as trailing stop-limit orders.
• Leverage Adjustment: Provides the flexibility to adjust your leverage level both before and after entering a position.
• Isolated Margin: Allows traders to isolate the risk of individual perpetual contract positions, limiting the impact of negative market movements on other positions.

Step 6: Special Programs and Incentives

• Copy Trading: Enables traders to follow and mimic the trades of successful traders, with customizable parameters for risk management.
• Referral Programs: Rewards traders for referring new users to the platform.
• Trading Competitions: Offer incentives and prizes to traders who demonstrate exceptional trading performance.