Perpetual Trading 101

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The first thing about trading perpetual contracts is that you can trade with high leverage levels at a low cost, as compared to trading in the spot market. This is because spot markets have a limited supply of coins, whereas perpetual markets do not. What this means is that potential profits are much higher when trading perpetual contracts.

Secondly, perpetual contracts do not require traders to buy or sell the real asset. Therefore, they can simply trade against the price movement of the underlying asset using less funds than in a spot or futures market.

Additionally, perpetual contracts have no expiry date. Traders do not need to go through the hassle of rolling over these contracts if they decide to hold on to their positions for a longer period of time. They can hold on to their positions indefinitely, as long as they are not liquidated.

Lastly, traders of perpetual contracts can potentially earn more side profits through the funding rate, where longs or shorts provide funding to each other based on the deviation of the perpetual price against the index.

What is "long" and "short"?

When you open a position for a perpetual contract, you enter an agreement to trade against the price movement of the underlying asset. The price of the perpetual contract is always anchored as closely as possible to the price of the underlying asset via the funding rate.

To “go long” is to enter a perpetual contract believing that the price of the asset, and therefore the price of the contract, will increase. When it does, you then have the opportunity to close your position and sell the contract at a higher price than when you entered (or bought it), thereby profiting from the upward price movement

To “go short” is to enter a perpetual contract believing that the price of the asset, and therefore the price of the contract, will decrease. When it does, you then have the opportunity to close your position and buy the contract at a lower price than when you entered (or sold it), thereby profiting from the downward price movement.

Perpetual contracts do not have an expiry date, and you can hold your position open for as long as you don’t get liquidated.

Learn more:

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