About Perpetual Contracts

What are Perpetual Contracts?

Perpetual contracts (Perpetual Futures) are a type of derivative contract commonly found in cryptocurrency and other financial markets. Unlike traditional futures contracts, perpetual contracts have no expiration date or settlement date, allowing investors to hold them indefinitely. Their main characteristics are as follows:

1. No Expiration Date: Unlike futures contracts, perpetual contracts do not have a fixed settlement date or expiration time, allowing holders to hold them indefinitely without worrying about expiration.

2. Price Anchoring: The price of a perpetual contract is typically closely linked to the spot market price of the underlying asset (such as Bitcoin, Ethereum, etc.). If the contract price deviates from the spot market price, funding fees will cause the market to revert to equilibrium.

3. Leverage: Perpetual contracts allow investors to use leverage, meaning they can control larger positions with less capital. This feature increases both potential profits and risks.

4. Risk Management: Investors can choose stop-loss and take-profit strategies to manage risk. Because contracts are typically highly leveraged, traders need to carefully manage their positions to avoid forced liquidation.

Position Allocation Modes

**Cross Margin Mode:** Because all positions share a single margin pool, losses in one position could deplete the entire account, potentially leading to forced liquidation. If the account balance is insufficient to cover losses across all positions, all positions may be liquidated.

**Isolated Margin Mode:** In isolated margin mode, each position has its own independent margin. This means only the margin allocated to a specific position affects its risk. If a position's losses exceed its allocated margin, the system will automatically force liquidation without affecting other positions in the account.

**Opening a Position:**

1. Opening by Position Value

This refers to the total value of the position, determined by the leverage and the current value of the currency pair.

Example:

• If you open a position with a value of 20,000 USDT and your leverage is 200x, your required margin is 100 USDT.

If the market price rises, the total value of the position increases, amplifying your profits; if the market price falls, losses will also be amplified.

2. USDT-Margined Positions

USDT-margined positions refer to opening positions using USDT (or other stablecoins) as margin and settlement currency. In this model, all profits and losses are calculated in USDT, and margin is also paid in USDT.

Example:

• Suppose you use 1,000 USDT as margin to open a 10x leveraged position to trade BTC contracts. If the price of BTC rises, your profit is calculated in USDT; if the price of BTC falls, your loss is also calculated in USDT.

Order Types

Market Order: Advantages: No price limit, easy execution, fast execution, and high execution rate.

Disadvantages: The actual execution price is only known after the order is executed.

Limit Order: Advantages: Larger profit margin.

Disadvantages: Delayed execution; the order may not be executed until the limit price is reached.

Scheduled Order: Triggered only when a preset condition is met. The user needs to set a trigger price; reaching the trigger price will activate the order. Before an order is triggered, there is no margin requirement when the order is placed. If the account does not have sufficient margin when the order is triggered, the order will fail and be automatically cancelled.