Detailed introduction and gameplay of the price calculation and adjustment rules of perpetual contracts
- James BondOriginal
- 2024-09-28 16:05:36913browse
The perpetual contract is a leveraged cryptocurrency contract that does not require delivery of the underlying asset. Its price is calculated based on the mark price, and traders can hold positions indefinitely. The price adjustment mechanism includes funding rate and mark price adjustments to ensure that contract prices remain consistent with the spot market. To participate in trading, you need to select a trading platform, make a deposit, select a trading pair, set leverage, open and close a position. Perpetual contract trading is high-risk, so you need to use leverage carefully and manage risks well.
Price calculation and adjustment rules for perpetual contracts
What is a perpetual contract?
Perpetual contract is a cryptocurrency contract that does not require delivery of the underlying asset. Traders can use leverage to amplify profits. Unlike futures contracts, perpetual contracts have no expiration date, so traders can hold positions indefinitely.
Price Calculation
The price of the perpetual contract is mainly based on the mark price of the spot market. The mark price is calculated by a weighted average of real-time prices across multiple spot trading platforms collected by cryptocurrency exchanges.
Price adjustment mechanism
In order to ensure that the price of the perpetual contract remains consistent with the spot market, the exchange will use the following mechanism to adjust the price:
- Funding Rate: When the perpetual contract price is higher than the mark price, longs (buying the contract) pay shorts (selling the contract) and vice versa. Funding rates are settled every 8 hours.
- Mark price adjustment: When there is a large deviation between the perpetual contract price and the spot market price, the exchange will adjust the mark price, thus affecting the funding rate and attracting more parties to enter the market. Trade until the price reaches equilibrium.
How to play
To participate in perpetual contract trading, investors need to follow the following steps:
- Select Transaction Platform: Choose a reliable cryptocurrency exchange that offers perpetual contracts trading.
- Deposit funds and select trading pairs: Deposit funds into the exchange and select the cryptocurrency pairs you wish to trade.
- Set leverage: Select a leverage to magnify your profits or losses. The higher the leverage, the greater the potential returns and risks.
- Open a position: Decide whether to buy a perpetual contract (long) or sell (short).
- Close: Close to close your position when you reach your target profit or stop loss.
Notes
- Perpetual contract trading carries high risks and may result in loss of funds.
- It is crucial to understand the price calculation and adjustment mechanism before trading.
- Be cautious when using leverage, because leverage magnifies returns while also magnifying risks.
- Always develop a risk management strategy to protect your capital in volatile markets.
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