Quickly understand perpetual contracts
Perpetual contracts in the currency circle are controversial. Some people say that they are the "road of no return" to liquidation, while others make a lot of money with them. Players of spot and contract always "complain" to each other. So what is the perpetual contract all about?
Simply put, perpetual contracts are like futures, but there is no delivery date. You can open and close positions at any time, and you can go long (bullish) or short (bearish). For example, if you think a certain coin is going to rise, open a long order. If it rises, you will make money, and if it falls, you will lose money; if you are bearish, open a short order, and if it falls, you will make money.
Why do people like to play perpetual contracts?
First, there is little capital and they want to make money quickly. Spots wait for the bull market too slowly, and the income is limited. It is also possible that the bull market will not come or the coins bought will not rise. For contracts, once the leverage is released, the income will be large, and the market can be accurately seen, and the funds can soar up.
Secondly, both long and short positions can make money, which is more "fair". Spot trading can only make money by going long, but contracts are different. You can make profits whether the price goes up or down, and you don't have to worry about the dealer using low-priced chips to cut leeks, and you can also "fight wits and courage" with the dealer.
However, there are also a few things to pay attention to in contract trading:
Leverage, which is an amplifier of returns and risks. The exchange gives you 1 to 125 times leverage, and small funds can also pry large positions, but the higher the leverage, the greater the risk. For example, with 100 times leverage, a price fluctuation of 1% may double or blow up the position. Some people lose money with low leverage, so they increase leverage to make up for the original investment, but the result is that the position is blown up faster.
Funding rate, this is to make the price of perpetual contracts match the spot price. The exchange adjusts it through the funding rate. When the rate is positive, the long side pays the short side; when the rate is negative, the short side pays the long side. It is paid once every 8 hours, and the amount is calculated according to the transaction amount (principal × leverage) × funding rate.
The handling fee is divided into two types: "taking orders" (high handling fee) and "placing orders" (low handling fee), and it is charged in both directions. For example, Binance has a handling fee of 0.05% for taking orders and 0.02% for placing orders.
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