If you are here you’ve likely heard of perpetuals, particularly if you are a cryptocurrency investor (newbie or experienced!).
Perpetuals are a type of cryptocurrency derivative that have gained popularity in recent years. They allow traders to speculate on the price movement of an underlying cryptocurrency asset without actually owning the asset.
Yep, you can make money on Bitcoin even if you missed the dip.
Perpetuals are similar to futures contracts, but with a few key differences.
One of the most significant differences is that perpetuals have no expiration date. This means that traders can hold their positions for as long as they want, which makes them an attractive option for traders who want to take a long-term position on the market. A trader will take a position speculating that the price of the asset being traded will go up (long) or go down (short). The trader will have a running P&L (Profit & Loss) which will reflect their +/- position at any time, depending on their entry point and the current price of the asset.
Perpetuals trading is also known for its high leverage. With leverage, traders can increase the size of their position by borrowing funds from the exchange or trading platform. For example, if a trader has $1,000 (collateral) and wants to trade with a leverage of 10x, they can take a position worth $10,000. While leverage can amplify profits, it can also magnify losses, so it is important for traders to use it carefully.
If a trader’s collateral is exhausted in a losing trade, they may be liquidated. When liquidated, it means the trade is automatically closed and the trader loses all of their collateral.
Perpetuals trading is popular among cryptocurrency traders because it allows them to trade in a volatile market without actually owning the underlying asset. This means that traders can take advantage of price movements without the hassle of owning and storing cryptocurrencies. However, like any financial instrument, there are risks associated with perpetuals trading, so it is important for traders to do their own research and understand the risks involved before trading.
So, to summarize:
- Perpetuals are a type of cryptocurrency derivative that allow traders to speculate on the price of an underlying cryptocurrency asset without owning the asset itself.
- Unlike futures contracts, perpetuals have no expiration date, meaning that traders can hold their positions for as long as they want.
- Perpetuals trading allows for high leverage, which allows traders to increase the size of their position by borrowing funds from the exchange.
- Traders use perpetuals trading to take advantage of price movements without owning or storing cryptocurrencies.
- However, perpetuals trading comes with risks and traders must understand the risks involved before trading.
Please remember that trading carries risks and you may profit or lose money. When using a centralized exchange you have the risk of the broker or exchange (of which you provide custody of your funds) becoming insolvent, as seen in the bear market of 2022. With decentralized trading such as Foxify, there is no external risk to your funds other than your own performance as a trader.
Disclaimer: any information provided by Foxify as part of the Academy is for informational/educational purposes only and not financial advice. Please always do your own research.