How to Trade Futures with CoinEx

While the “crypto winter” significantly impacted spot volumes, the derivatives market exploded in terms of trading volume.

For example, an Exchange Review report (March 2022) from CryptoCompare showed that derivatives volumes increased by 4.58% to $2.74 trillion, representing 62.8% of the total crypto market. -change. Meanwhile, spot volumes only accounted for 37.2% of crypto market volume.

The above statistic suggests that a growing number of investors are trading derivatives like futures as they seek to hedge against risk and improve capital efficiency. Here’s what you need to know before trading futures contracts.

How futures contracts work

The biggest difference between spot and futures is that the latter significantly improves the capital efficiency of users. In spot trading, users can only profit from rising prices, while futures traders can profit from rising or falling prices – as long as the price direction is correct.

When trading futures, users can choose between two directions: long trades (buy) or short trades (sell).

Long trades: User A thinks the price of BTC will rise. Suppose the current price of BTC is 40,000 USDT and he spends 4,000 USDT for 0.1 BTC with 10x leverage. When the price hits 45,000 USDT, then it could sell the crypto for a profit. In short, this approach is called “buy first and sell later”;

Short trades: User B thinks the price of BTC will go down. Suppose the current price of BTC is 40,000 USDT and he spends 4000 USDT for 0.1 BTC and sells his stake with 10x leverage. When the price drops to 35,000 USDT, then he can buy the crypto for profit. In short, this approach is called “sell first and buy later”;

Here are some basic terms you need to master to better understand how futures trading works.

Basic Futures Concepts

Leverage : The possibility of increasing your capital using borrowed crypto funds, and which allows you to multiply your potential profits. Currently, most traditional trading platforms offer a maximum leverage ratio of 100x. In this case, if you have 0.1 BTC, you can open a position up to 10 BTC. However, by multiplying profits, leverage also increases risk.

Margin : when trading futures contracts, users have to pay a small amount of money according to a certain ratio as a security deposit for the performance of the contract, called Margin. Specifically, the margin required to start your position is called Initial Margin, and a proportion of the position value required to hold the position is Maintenance Margin.

Forced liquidation: this occurs once a user’s available margin fails to cover the maintenance margin.

Funding rate: In the cryptocurrency market, futures contracts are divided into two categories: delivery contracts and perpetual contracts. Delivery contracts are settled monthly/quarterly to ensure that the futures price and the spot price remain roughly the same over the long term. Thanks to these regular settlements, the market price of delivery contracts tends towards the spot price.

Perpetual contracts, on the other hand, have no delivery date. To provide price stability, these contracts use the funding rate – periodic payments to long or short traders to minimize the price difference between futures prices and spot prices.

How to trade futures contracts on CoinEx?

Step 1 : Register an account CoinEx and navigate to the futures page. If you’re a new trader, learn more through the Beginner’s Guide, watch the Futures Tutorial, and take the quiz.

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2nd step : Transfer funds from other accounts to the term account;

Step 3: Select a cryptocurrency for your futures position (CoinEx offers over 100 cryptos for linear contracts and 2 cryptos for inverse contracts);

Step 4: Set up a leverage ratio for your position (CoinEx now offers leverage ranging from 3x to 100x);

Step 5: Adjust the position margin ratio according to your own risk tolerance as suggested by CoinEx;

Step 6: Place an order based on the order types provided by CoinEx Futures.

Remark : Futures contracts are a special type of investment product and the futures price, affected by multiple factors, is subject to high volatility. High leverage ratios and high risk are the most crucial features of futures contracts. That said, users often struggle to master all the features of futures contracts. Careful decision making is required before trading futures contracts.

* The above should not be taken as financial advice.

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How to Trade Futures with CoinEx

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