How does the CoinEx perpetual contract work?

CoinEx perpetual contracts offer traders unique advantages such as perpetual duration, leverage trading, low fees, and high liquidity.

Nov 27, 2024 at 07:28 pm

Understanding CoinEx Perpetual Contracts: A Comprehensive Guide

Introduction

CoinEx perpetual contracts, also known as perpetual futures or inverse perpetual swaps, are financial instruments that allow traders to speculate on the future price of cryptocurrencies. They are similar to traditional futures contracts but offer several unique advantages, including perpetual duration, leverage trading, and low fees. This guide will provide a comprehensive overview of how CoinEx perpetual contracts work, answering common questions and outlining the steps involved in trading them.

How do CoinEx Perpetual Contracts Differ from Traditional Futures?

• Perpetual duration: Perpetual contracts have no fixed expiration date, unlike traditional futures contracts. This allows traders to hold positions indefinitely without the need to roll over into new contracts.
• Leverage trading: CoinEx perpetual contracts offer leverage, allowing traders to amplify their profits (or losses) by using borrowed funds. Leverage can range from 1x to 100x, giving traders the potential for significant returns.
• Low fees: CoinEx charges competitive trading fees that are significantly lower than many other cryptocurrency exchanges. The flat fee structure ensures that traders only pay a small commission on executed trades.
• High liquidity: CoinEx's large trading volume ensures ample liquidity, minimizing slippage and providing tight spreads. This makes it easier for traders to enter and exit positions quickly and efficiently.

Understanding the Mechanics of CoinEx Perpetual Contracts

1. Contracts specification: Each perpetual contract has specific characteristics, including the underlying cryptocurrency, contract size, and margin requirements. Traders should carefully review these specifications before entering a trade.
2. Funding rate: Perpetual contracts use a funding rate mechanism to maintain balanced market conditions. When the demand for a particular contract is high, the funding rate becomes positive, incentivizing short positions to borrow from long positions. Conversely, a negative funding rate favors long positions.
3. Mark price: The mark price is a dynamic market price that is used to calculate the realized profit or loss on a perpetual contract. It is typically derived from a weighted average of spot prices across multiple exchanges.
4. Initial margin: To open a perpetual contract, traders must post initial margin, which is a percentage of the contract value. This margin serves as collateral to cover potential losses.
5. Maintenance margin: Traders must also maintain a minimum maintenance margin to keep their positions open. If the account balance falls below the maintenance margin requirement, the broker may liquidate the position.
6. Liquidation: Liquidation occurs when the account balance is insufficient to cover potential losses. The broker will automatically close the position and sell the underlying cryptocurrency to recover the lost funds.

Steps for Trading CoinEx Perpetual Contracts

1. Create an account: Register an account on the CoinEx website or mobile app.
2. Fund your account: Deposit cryptocurrencies into your account to use as trading capital.
3. Choose a contract: Select the perpetual contract that you want to trade based on the underlying cryptocurrency and specifications.
4. Enter your position: Specify the trade parameters, including the quantity, leverage, and order type (market or limit order).
5. Manage your risk: Use stop-loss orders and position sizing strategies to limit your downside risk.
6. Monitor your position: Track the mark price and funding rate to monitor the profitability of your trade.
7. Close your position: When you are ready to exit your trade, manually close the position or use a take-profit order to lock in profits.