How to open contract trading in Kraken

Kraken's contract trading features accommodate various needs, enabling traders to leverage assets, utilize margin, initiate short positions, and set up automated stop-loss and take-profit orders.

Nov 17, 2024 at 03:31 am

How to Open Contract Trading in Kraken

Contract trading is a form of derivative trading that allows traders to speculate on the future price of an asset without having to own the underlying asset itself. This type of trading can be used to hedge against risk, or to speculate on the direction of the market.

Kraken is one of the leading cryptocurrency exchanges that offer contract trading. To open a contract trading account on Kraken, you will need to:

1. Create a Kraken account. If you do not already have a Kraken account, you can create one by visiting the Kraken website and clicking on the "Create Account" button.
2. Verify your identity. Once you have created an account, you will need to verify your identity by providing your name, address, and date of birth.
3. Fund your account. You can fund your Kraken account by depositing cryptocurrency or fiat currency.
4. Enable contract trading. To enable contract trading, you will need to go to the "Settings" page and click on the "Enable Contract Trading" button.
5. Choose a trading pair. Once you have enabled contract trading, you can choose a trading pair to trade. Kraken offers a variety of trading pairs, including BTC/USD, ETH/USD, and LTC/USD.
6. Place an order. To place an order, you will need to specify the order type, the order size, and the order price.
7. Monitor your order. Once you have placed an order, you can monitor it by going to the "Orders" page.

Contract Trading Features on Kraken

Kraken offers a variety of contract trading features, including:

• Leverage: Kraken offers leverage of up to 50x for certain trading pairs. This means that you can trade with more capital than you have in your account.
• Margin trading: Kraken offers margin trading, which allows you to borrow funds from the exchange to trade with.
• Shorting: Kraken allows you to short contracts, which means that you can bet on the price of an asset to go down.
• Stop-loss orders: Kraken offers stop-loss orders, which allow you to automatically sell your contracts if the price of the asset falls below a certain level.
• Take-profit orders: Kraken offers take-profit orders, which allow you to automatically sell your contracts if the price of the asset rises above a certain level.

Risks of Contract Trading

Contract trading is a high-risk activity and can result in significant losses. Some of the risks associated with contract trading include:

• The risk of liquidation: If the price of the asset moves against you, you may be liquidated, which means that your position will be closed and you will lose your entire investment.
• The risk of margin calls: If you are using margin trading, you may be subject to margin calls if the price of the asset moves against you. A margin call is a request from the exchange to add more funds to your account, or to reduce the size of your position. Failure to meet a margin call can result in liquidation.
• The risk of volatility: The cryptocurrency market is highly volatile, which means that the price of assets can fluctuate significantly in a short period of time. This can make contract trading a risky activity.

How to Mitigate the Risks of Contract Trading

There are a number of steps you can take to mitigate the risks of contract trading, including:

• Only trade with capital that you can afford to lose.
• Use leverage only when you are confident in your trading strategy.
• Monitor your orders regularly and close them out if the price of the asset moves against you.
• Be aware of the risks of margin trading and only use it if you are comfortable with the potential risks.
• Educate yourself about contract trading and the underlying market before you start trading.