How to trade perpetual contracts on CoinEx

By understanding perpetual contracts, traders can access the cryptocurrency market without physical delivery and utilize leverage to amplify potential returns and risk exposure.

Nov 24, 2024 at 04:18 am

1. Understanding Perpetual Contracts

Perpetual contracts, also known as inverse swap contracts, offer traders exposure to the underlying asset's price movements without physical delivery. They provide leverage, allowing traders to amplify their potential returns while also increasing their risk. Unlike futures contracts, perpetual contracts have no expiration date, enabling traders to hold positions indefinitely.

2. Choosing a Trading Platform

Selecting a reputable trading platform is crucial for perpetual contract trading. CoinEx, a leading cryptocurrency exchange, offers competitive trading fees, a user-friendly interface, and robust security measures. Its comprehensive charting tools and advanced order types cater to both beginners and experienced traders.

3. Funding Your Account

To start trading perpetual contracts on CoinEx, you need to fund your account with the desired trading currency. CoinEx supports a wide range of deposit methods, including cryptocurrency transfers, credit cards, and wire transfers.

4. Understanding Perpetual Contract Mark and Index Prices

Perpetual contracts track two key prices: the Mark Price and the Index Price. The Mark Price is the real-time market price of the underlying asset, used for settlement. The Index Price is a weighted average of various spot prices from reputable exchanges, used to determine funding rates and prevent price manipulation.

5. Calculating Funding Rates

Funding rates are paid periodically to maintain the peg between the Mark Price and the Index Price. When the Mark Price is higher than the Index Price, long positions pay short positions a funding rate to incentivize short-selling and bring the Mark Price closer to the Index Price. Conversely, when the Mark Price is lower than the Index Price, short positions pay long positions a funding rate.

6. Opening a Perpetual Contract Position

To open a perpetual contract position, traders need to specify the trading pair, the contract size, the leverage level, and the order type. CoinEx offers a range of order types, including market, limit, and stop-loss orders. Traders can also choose between long and short positions, depending on their market outlook.

7. Managing Risk

To mitigate risks, traders should employ proper risk management strategies. Setting stop-loss orders and adjusting the leverage level accordingly are essential. Monitoring market conditions and adjusting open positions based on price movements is also crucial to avoid significant losses.

8. Closing a Perpetual Contract Position

To close a perpetual contract position, traders need to choose the same trading pair and contract size as the initial position but place an order in the opposite direction. For example, to close a long position, traders would place a short order of the same size.