Bitrue offers the ability to trade COIN-M perpetual futures on a variety of pairs. If you're new to the world of futures contracts then do not worry, as we've prepared a handy guide here to help you understand how it works.
In this article we'll assume that you already know the basics of cryptocurrency, and only introduce concepts that are new to futures trading.
1. Funding your account
Before you start trading for futures you'll need to add funds to your futures account.
A separate futures fund is necessary as it defines the amount of funds that you are willing to put at risk of liquidation, which also influences the margins that you receive on your trades. The golden rule here is to only transfer an amount of funds that you are willing to lose. Futures trading is inherently far riskier than regular cryptocurrency trading, so please do not put yourself or your family in any financial danger.
On the right side of the trading interface you can see an icon of two arrows. Click this icon to initate the funding process. You can move USDT from your current account to your futures account, or vice versa.
You can now initiate a purchase of a COIN-M perpetual contract. First select the coin pair that you wish to use as the underlying asset from the top left (e.g. BTC-USD), and then fill in the details of your purchase on the right.
2. Margin Mode
Bitrue supports two different margin modes - Cross and Isolated.
Cross margin will use all of the funds available in your futures account as the margin. The includes any unrealized profit you may have on other open positions.
Isolated on the other hand will only use an initial amount specified by you as the margin.
3. Leverage Multiple
COIN-M futures allow you to multiply the profits and losses on your positions through a system known as leverage. For example, if you select a leverage multiple of 3x and the value of your underlying asset rises by $1, you will make $1 * 3 = $3. Conversely, if the underlying asset falls by $1 you will lose $3.
The maximum leverage available to you will depend on the asset that you choose to purchase as well as the value of your position - to avoid significant losses, larger positions will only have access to smaller leverage multiples.
4. Long / Short
Unlike regular spot trading, with futures you can either buy long or sell short.
Buying long means that you believe the value of the asset that you are buying is going to rise over time, and you will profit from this rise with your leverage acting as a multiple on this profit. Conversely, you will lose money if the asset falls in value, again multiplied by the leverage.
Buying short is the opposite - you believe that the value of this asset will fall over time. You will profit when the value falls, and lose money when the value increases.
Now that you have opened your position there are several other new concepts to be aware of.
- Funding Rate
At the top of the trading interface you will see a Funding Rate and Countdown timer. This is a mechanism employed to ensure that the price of the contracts is concurrent with the underlying asset.
When the countdown reaches 0 users with open positions will be assessed to see if they need to pay the percentage fee that is listed. If the contract price currently exceeds the underlying asset's price, then long positions will pay the fee to short position holders. If the contract price is currently below the underlying asset's price, then short positions will pay the fee to long position holders.
Funding fees are collected once every 8 hours at 00:00, 08:00, and 16:00 UTC. The fee is calculated using the following formula:
Fee = Position quantity * Value * Mark price * Capital expense rate
These transfers are entirely user-to-user. Bitrue does not collect any of these fees.
- Mark Price
Mark price is a slightly modified version of the actual price of the contract. While the mark price and the real price will generally be consistent with a very small margin of error, the mark price is more resistant to sudden changes and high volatilities, which means it is harder for abnormal or malicious events to have an effect on the price value and cause unexpected liquidations.
The mark price is calculated by finding the median value from the Latest Price, the Reasonable Price, and the Moving Average Price.
Latest Price = Median (Buy 1, Sell 1, Trade Price)
Reasonable Price = Index price * (1 + capital rate of the previous period * (time between now and the next charge of funds / collection of funds rate interval))
Moving Average Price = Index Price + 60-Minute Moving Average (Spread)
Spread = The exchange's median price - index price
- Index Price
Index price refers to the value of the contract over several different market locations, including at Bitrue itself. It's an additional way to ensure that the price cannot be manipulated, as it will be impossible for a malicious attacker to affect the price at several locations concurrently.
- Ladder Reduction
In the event that a position reaches an unacceptable loss as defined by the available margin, the position will not necessarily be liquidated completely, but can simply be reduced according to a tiered ladder system. This protects both the positions of individual users, as well as the overall health of the market by preventing large chain reaction liquidations.
Positions will be partially liquidated to the following degrees until the margin is sufficient for the maintenance margin rate.
The related formulas are as follow:
Initial margin = Position value / leverage
Maintenance margin = Position value * Current tiered maintenance margin rate
The maintenance margin rates for all coins are listed here.
- Maintenance Margin Rate
This refers to the minimum margin rate of a position that must be maintained in order to keep the position open. If the margin rate falls below this maintenance margin rate then the position will be liquidated or reduced by Bitrue's systems.
- Take Profit / Stop Loss
Bitrue provides a way for you to automatically set up price points where the exchange will sell off all or part of your position when the mark price of the asset hits a certain value. It is similar to a Trigger Order used in spot trading.
Once you have opened a position, look in the Positions tab at the bottom of your trading interface to find the details of all open positions. Click on the TP/SL button on the right to open a window where you can enter the details of your order.
Enter the trigger price in the first field - when the mark price of the asset hits the value that you enter here your order will be submitted. You can choose to sell your asset using either limit or market trades. You can also choose to specify how much of your holdings you wish to sell off in the order.
- Unrealized Profit and Loss
The calculation for determining your current profit or loss on a position is the difference in the current price compared to the purchase price, multiplied by your selected leverage. As this value may not be immediately apparent the current profit or loss is shown as Unrealized PnL. It can be thought of as the change in your overall portfolio value if you were to close the position immediately.
You can start using Bitrue's COIN-M Perpetual Futures function here.