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Gate.io Cryptopedia: Guide to Contract Trading
2021-05-26, 04:24
Author: Gate.io Researcher: Gazer.C
What Is Contract Trading?
Contract trading has become a popular game in the cryptocurrency market, where traders can use leverage to lock in a portion of their margin to go long or short to achieve big returns even with small capital.
Contract trading is similar to trading futures contracts in the traditional financial markets and generally offers 1X-100X leverage, providing more options than traditional leveraged trading. And in the cryptocurrency market, contract trading is divided into the following two types:
1.Delivery contracts: Similar to traditional futures contracts, there is a specific delivery date on which both buyers and sellers are obligated to fulfill the contract to complete the delivery.
2.Perpetual contracts: There is no specific delivery date, so as long as the position is not forced to close, they can be held.
How Can I Profit from Trading Contracts?
Contract trading is flexible and can be traded long or short. We can profit in different market conditions.
Going long traditionally refers to buying in at a low price and selling out at a high price. The traders use leverage to lock in a small amount of money as margin, then borrow a certain currency proportionally. When the price of the currencies rises to a certain level, the traders will sell out the currencies and return the borrowed funds to the platform. The traders will earn the rest of the money. The number of long contracts held is also known as a long position.
Going short refers to selling out at a high price and buying in at a low price. Through leverage, a trader borrows a certain amount of a specific currency from a platform and sells it with less money as margin. After that, the trader will repurchase the currency and return it to the platform. The trader keeps the spreads as profit.
In the cryptocurrency market, the price of the currency fluctuates frequently. Experienced traders can switch between going long or short depending on the currency price fluctuation by making accurate judgments about the market. They can also make profits in a continuously fluctuating market.
What Are the Risks in Contract Trading?
Since the essence of contract trading is margin trading, traders are required to maintain margin at the minimum amount required for the position. When the margin balance falls below the maintenance margin level, the position will be forcibly liquidated, commonly known as a "position liquidation". The marking price that triggered such liquidation is the price of forced liquidation. At this point, the system will liquidate all positions according to the most desirable price to repay, and all previously locked margin will be taken away directly.
Under the same contract, the maintenance margin ratio is fixed. The initiation margin is related to the leverage. The higher the leverage, the lower the initiation margin. The closer the initiation margin is to the maintenance margin, the more likely it is to suffer forced liquidation. Therefore, traders need to choose the leverage ratio and margin ratio wisely and adjust their positions in time according to the market price to prevent losses from liquidation.
1.Current buy orders, sell orders, latest prices, and latest transaction data.
2.Operation area: here you can modify the leverage ratio and submit a commission of going long or going short.
3.Position information area: information on current positions held, historical commissions, and trading records, allowing monitoring of personal trading activities.
4.Additional information area: links to current contract introduction, FAQ, rates, and other related information.
What is the Difference between BTC Settled Perpetual Contract and USDT Settled Perpetual Contract?
Gate.io is currently open for trading in multiple types of contracts and is one of the most mainstream cryptocurrency contract marketplaces in the world. In 24-hours, trading volume is up to $2.6 billion. You’re invited to experience up to 100x leverage. Below is a detailed explanation of how to participate in contract trading.
Introduction of Gate.io Contract Trading Interface on the Website
5.Basic information about the current contracts for the day or 24 hours, including marking price, daily increase, position volume, rates, and trading volume in 24 hours.
6.Price trend chart: the price trend of the current contract. You can view the trend in different time periods, draw and edit graphs.
Contract transactions are usually divided into BTC Settled Perpetual Contract and USDT Settled Perpetual Contract.
BTC Settled Perpetual Contract, such as the BTC/USD trading pair contract, is a contract with Bitcoin as the underlying for settlement. Collateralization and P & L settlement are done with Bitcoins in the contract account. Since Bitcoin itself goes up and down a lot, the Bitcoin price is also floating in addition to the price of the contract itself. Therefore BTC Settled Perpetual Contract is more likely to extend profits or losses.
USDT Settled Perpetual Contract, such as the BTC/USDT trading pair contract, is a contract that uses the stablecoin USDT as the underlying for settlement. Whether you go long or short, you need to transfer USDT to the contract and use USDT to settle the final profit or loss of the purchase or sale. Since USDT is more stable, you can avoid additional ups and downs caused by price fluctuations of certain coins in the contract.
Features & Desc-riptions of Gate.io Contract Trading
Contract trading rates
When the funding rate is positive, users that go long pay for the users that go short. When the funding rate is negative, users that go short pay for users that go long. Funding fees are paid or collected by users that go long or short. They are not paid to the Gate.io platform. Gate.io does not charge any fees.
For more information on contract trading rates, please click here for further reference.
Hedge Mode
Hedge mode allows traders to hold both long and short positions in the same contract, i.e. to hold a long or short contract at the same time. Suppose a trader is positive about the future of Bitcoin and holds a long position, but the price fluctuates due to certain factors. Then the trader can choose to increase his short position while not liquidating it, and earn money during the fluctuation.
If this feature is not switched on first, you cannot hold both long and short positions. The hedge mode can be switched on in the setting on the trading page.
Contract trading calculator
The contract trading calculator provides three features: profit and loss calculation, price calculation of forced position liquidation, and the calculation of yield on the target price. Traders can calculate these according to their needs.
Step 1. How to open an account and deposit funds for Gate.io contract trading?
Before you can start trading contracts, you need to have a Gate.io account and deposit. The procedures are as follows:
How do I open a Gate.io contract account?
Before you can open a Gate.io contract account, you need to have a Gate.io regular account. If you have not yet signed up for a regular account, please refer to the steps in Gate.io - How to create your account, or visit the Gate.io signup directly to complete your registration. After registering, you can open a contract account in the contract trading.
After opening an account, you can deposit or fund your Gate.io account.
Please refer to the following for depositing and trading fiat currency
Buying in fiat currency
How to deposit
The process of transferring funds to a contract account (for example, the BTC/USD trading pairs of perpetual contracts).
Before trading contracts, we need to transfer funds to a special contract account.
A contract account is an account dedicated to contract trading and is separated from other accounts, such as coin accounts. When you do contract trading, you need to trade with the funds under the contract account as margin. After the different accounts are separated, even if the contract account of a certain type is liquidated, it will not affect the funds of other accounts, so you need to transfer the funds to the contract account first. The process is as follows:
1.Find [Transfer] in [Wallet]
2.In [Funds Transfer] that pops up, select [Perpetual Futures Account], input the amount of Bitcoin (or USDT), and click [Confirm].
3.After the transfer, select [USDT Settlement] from [Trading] - [Perpetual Contracts] at the top of the page.
4.Read the risk warning carefully and confirm "I have read and understand the market rules and risks", and start trading BTC/USDT pairs in perpetual contracts!
Step 2. How do I open a position in Gate.io contracts?
There are three ways to place a contract (open a position): Limit Order, Market Order, and Stop Order.
1.Trading of Limit Order (for example, BTC/USD trading pair)
Step 1: Select [Limit Order] in the operation area to submit an order
Step 2: Click [Buy Long] or [Sell Short], enter the page of trading confirmation, and confirm:
Step 3: On the page of the current commission list to view the submitted order.
Step 4: After the order is completed, you can view the current position information below:
2.Trading in the Market Order
That is, trade with the most desirable market price and no order needs to be submitted.
Operation process:
Step one: select [market order]. You only need to input the number of contracts and adjust the leverage ratio. There is no need to input the price.
The rest of the steps are the same as [the trading of limit order].
3. Trading of Stop Order
When the market price reaches the trigger price, the order will be automatically submitted in accordance with the price, number, and trading types.
Step 3. How do I reduce or liquidate a position?
After a successful trade, the trader already has a corresponding position according to the previous order type. The trader can buy or sell the position by reducing or liquidating it.
A position reduction is a new order contrary to an existing position in the one-way mode, which, after the order has been closed, will result in the following 3 situations:
1.If the number of inverse contract positions is less than the number of existing positions, it is called "counter-party liquidation". You can check the "profit and loss" in the details.
2.If the number of positions in the inverse contract equals the number of existing positions, the position is "liquidated". However, the word "liquidation" is not marked in the order. The liquidated positions cannot be viewed directly in the [Closed Positions].
3.If the number of positions in the inverse contract is greater than the number of existing positions, you will hold different contract positions.
As with position opening, there are three ways to close a position, i.e., limit order, market order, and stop order.
1.Limit order liquidation: click [Close Position] on the right side under the [Position] list. Click [Limit Order], input the price, and select [Cross] to confirm. You can close the position when the order is completed. Before the order is completed, you can check the details in the present-page order and cancel the order.
2.Market order liquidation: the operation is the same as the limit order. You don’t need to input the price. The system will automatically close the position quickly according to the current market price.
3.Stop order liquidation: If traders cannot keep informed of the price trend, they can close the position by pre-setting the trigger price, order price, and quantity. When the latest market price reaches the penalty price, the system will launch an order according to the pre-setting.
Risk Tips
Contract trading is highly leveraged and risky. Please do read the instructions and rules carefully and trade carefully within the risk range that the trader can personally bear.
Newcomers can experience trading contracts through the Gate.io perpetual contracts - demo trading function.
Perpetual Contracts Demo Trading: BTC/USDT Pairs
Author: Gate.io Researcher: Gazer.C
*This article represents the views of the researcher and does not constitute any investment advice.
What Is Contract Trading?
Contract trading has become a popular game in the cryptocurrency market, where traders can use leverage to lock in a portion of their margin to go long or short to achieve big returns even with small capital.
Contract trading is similar to trading futures contracts in the traditional financial markets and generally offers 1X-100X leverage, providing more options than traditional leveraged trading. And in the cryptocurrency market, contract trading is divided into the following two types:
1.Delivery contracts: Similar to traditional futures contracts, there is a specific delivery date on which both buyers and sellers are obligated to fulfill the contract to complete the delivery.
2.Perpetual contracts: There is no specific delivery date, so as long as the position is not forced to close, they can be held.
How Can I Profit from Trading Contracts?
Contract trading is flexible and can be traded long or short. We can profit in different market conditions.
Going long traditionally refers to buying in at a low price and selling out at a high price. The traders use leverage to lock in a small amount of money as margin, then borrow a certain currency proportionally. When the price of the currencies rises to a certain level, the traders will sell out the currencies and return the borrowed funds to the platform. The traders will earn the rest of the money. The number of long contracts held is also known as a long position.
Going short refers to selling out at a high price and buying in at a low price. Through leverage, a trader borrows a certain amount of a specific currency from a platform and sells it with less money as margin. After that, the trader will repurchase the currency and return it to the platform. The trader keeps the spreads as profit.
In the cryptocurrency market, the price of the currency fluctuates frequently. Experienced traders can switch between going long or short depending on the currency price fluctuation by making accurate judgments about the market. They can also make profits in a continuously fluctuating market.
What Are the Risks in Contract Trading?
Since the essence of contract trading is margin trading, traders are required to maintain margin at the minimum amount required for the position. When the margin balance falls below the maintenance margin level, the position will be forcibly liquidated, commonly known as a "position liquidation". The marking price that triggered such liquidation is the price of forced liquidation. At this point, the system will liquidate all positions according to the most desirable price to repay, and all previously locked margin will be taken away directly.
Under the same contract, the maintenance margin ratio is fixed. The initiation margin is related to the leverage. The higher the leverage, the lower the initiation margin. The closer the initiation margin is to the maintenance margin, the more likely it is to suffer forced liquidation. Therefore, traders need to choose the leverage ratio and margin ratio wisely and adjust their positions in time according to the market price to prevent losses from liquidation.
1.Current buy orders, sell orders, latest prices, and latest transaction data.
2.Operation area: here you can modify the leverage ratio and submit a commission of going long or going short.
3.Position information area: information on current positions held, historical commissions, and trading records, allowing monitoring of personal trading activities.
4.Additional information area: links to current contract introduction, FAQ, rates, and other related information.
What is the Difference between BTC Settled Perpetual Contract and USDT Settled Perpetual Contract?
Gate.io is currently open for trading in multiple types of contracts and is one of the most mainstream cryptocurrency contract marketplaces in the world. In 24-hours, trading volume is up to $2.6 billion. You’re invited to experience up to 100x leverage. Below is a detailed explanation of how to participate in contract trading.
Introduction of Gate.io Contract Trading Interface on the Website
5.Basic information about the current contracts for the day or 24 hours, including marking price, daily increase, position volume, rates, and trading volume in 24 hours.
6.Price trend chart: the price trend of the current contract. You can view the trend in different time periods, draw and edit graphs.
Contract transactions are usually divided into BTC Settled Perpetual Contract and USDT Settled Perpetual Contract.
BTC Settled Perpetual Contract, such as the BTC/USD trading pair contract, is a contract with Bitcoin as the underlying for settlement. Collateralization and P & L settlement are done with Bitcoins in the contract account. Since Bitcoin itself goes up and down a lot, the Bitcoin price is also floating in addition to the price of the contract itself. Therefore BTC Settled Perpetual Contract is more likely to extend profits or losses.
USDT Settled Perpetual Contract, such as the BTC/USDT trading pair contract, is a contract that uses the stablecoin USDT as the underlying for settlement. Whether you go long or short, you need to transfer USDT to the contract and use USDT to settle the final profit or loss of the purchase or sale. Since USDT is more stable, you can avoid additional ups and downs caused by price fluctuations of certain coins in the contract.
Features & Desc-riptions of Gate.io Contract Trading
Contract trading rates
When the funding rate is positive, users that go long pay for the users that go short. When the funding rate is negative, users that go short pay for users that go long. Funding fees are paid or collected by users that go long or short. They are not paid to the Gate.io platform. Gate.io does not charge any fees.
For more information on contract trading rates, please click here for further reference.
Hedge Mode
Hedge mode allows traders to hold both long and short positions in the same contract, i.e. to hold a long or short contract at the same time. Suppose a trader is positive about the future of Bitcoin and holds a long position, but the price fluctuates due to certain factors. Then the trader can choose to increase his short position while not liquidating it, and earn money during the fluctuation.
If this feature is not switched on first, you cannot hold both long and short positions. The hedge mode can be switched on in the setting on the trading page.
Contract trading calculator
The contract trading calculator provides three features: profit and loss calculation, price calculation of forced position liquidation, and the calculation of yield on the target price. Traders can calculate these according to their needs.
Step 1. How to open an account and deposit funds for Gate.io contract trading?
Before you can start trading contracts, you need to have a Gate.io account and deposit. The procedures are as follows:
How do I open a Gate.io contract account?
Before you can open a Gate.io contract account, you need to have a Gate.io regular account. If you have not yet signed up for a regular account, please refer to the steps in Gate.io - How to create your account, or visit the Gate.io signup directly to complete your registration. After registering, you can open a contract account in the contract trading.
After opening an account, you can deposit or fund your Gate.io account.
Please refer to the following for depositing and trading fiat currency
Buying in fiat currency
How to deposit
The process of transferring funds to a contract account (for example, the BTC/USD trading pairs of perpetual contracts).
Before trading contracts, we need to transfer funds to a special contract account.
A contract account is an account dedicated to contract trading and is separated from other accounts, such as coin accounts. When you do contract trading, you need to trade with the funds under the contract account as margin. After the different accounts are separated, even if the contract account of a certain type is liquidated, it will not affect the funds of other accounts, so you need to transfer the funds to the contract account first. The process is as follows:
1.Find [Transfer] in [Wallet]
2.In [Funds Transfer] that pops up, select [Perpetual Futures Account], input the amount of Bitcoin (or USDT), and click [Confirm].
3.After the transfer, select [USDT Settlement] from [Trading] - [Perpetual Contracts] at the top of the page.
4.Read the risk warning carefully and confirm "I have read and understand the market rules and risks", and start trading BTC/USDT pairs in perpetual contracts!
Step 2. How do I open a position in Gate.io contracts?
There are three ways to place a contract (open a position): Limit Order, Market Order, and Stop Order.
1.Trading of Limit Order (for example, BTC/USD trading pair)
Step 1: Select [Limit Order] in the operation area to submit an order
Step 2: Click [Buy Long] or [Sell Short], enter the page of trading confirmation, and confirm:
Step 3: On the page of the current commission list to view the submitted order.
Step 4: After the order is completed, you can view the current position information below:
2.Trading in the Market Order
That is, trade with the most desirable market price and no order needs to be submitted.
Operation process:
Step one: select [market order]. You only need to input the number of contracts and adjust the leverage ratio. There is no need to input the price.
The rest of the steps are the same as [the trading of limit order].
3. Trading of Stop Order
When the market price reaches the trigger price, the order will be automatically submitted in accordance with the price, number, and trading types.
Step 3. How do I reduce or liquidate a position?
After a successful trade, the trader already has a corresponding position according to the previous order type. The trader can buy or sell the position by reducing or liquidating it.
A position reduction is a new order contrary to an existing position in the one-way mode, which, after the order has been closed, will result in the following 3 situations:
1.If the number of inverse contract positions is less than the number of existing positions, it is called "counter-party liquidation". You can check the "profit and loss" in the details.
2.If the number of positions in the inverse contract equals the number of existing positions, the position is "liquidated". However, the word "liquidation" is not marked in the order. The liquidated positions cannot be viewed directly in the [Closed Positions].
3.If the number of positions in the inverse contract is greater than the number of existing positions, you will hold different contract positions.
As with position opening, there are three ways to close a position, i.e., limit order, market order, and stop order.
1.Limit order liquidation: click [Close Position] on the right side under the [Position] list. Click [Limit Order], input the price, and select [Cross] to confirm. You can close the position when the order is completed. Before the order is completed, you can check the details in the present-page order and cancel the order.
2.Market order liquidation: the operation is the same as the limit order. You don’t need to input the price. The system will automatically close the position quickly according to the current market price.
3.Stop order liquidation: If traders cannot keep informed of the price trend, they can close the position by pre-setting the trigger price, order price, and quantity. When the latest market price reaches the penalty price, the system will launch an order according to the pre-setting.
Risk Tips
Contract trading is highly leveraged and risky. Please do read the instructions and rules carefully and trade carefully within the risk range that the trader can personally bear.
Newcomers can experience trading contracts through the Gate.io perpetual contracts - demo trading function.
Perpetual Contracts Demo Trading: BTC/USDT Pairs
Author: Gate.io Researcher: Gazer.C
*This article represents the views of the researcher and does not constitute any investment advice.
*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.
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