A Beginner’s Guide to Perpetuals Trading

In cryptocurrency, perpetuals trading has become a popular way to speculate on price movements without actually owning the asset. This type of trading, centered on perpetual futures contracts, offers flexibility and potential for high returns by allowing traders to hold positions indefinitely. Below, we break down what perpetuals trading is, its history, and how to get started with it at Millionero.

1. What Are Perpetual Futures Contracts?

A futures contract is a financial agreement to buy or sell an asset at a set price on a future date. Perpetual futures, however, differ in that they have no expiration date. Traders can hold onto these contracts as long as they meet certain requirements, giving them complete control over when to exit.

Think of it as an open-ended bet on an asset’s price—whether it’s Bitcoin or Ethereum—without ever having to hold the actual asset. This flexibility is a key reason perpetual trading has gained popularity among crypto traders.

2. A Brief History of Perpetuals in Crypto

The concept of perpetual futures was initially theorized in the 1990s by Nobel laureate Robert Shiller, but it wasn’t until 2016 that BitMEX introduced the first crypto perpetual futures contract on Bitcoin named $XBTUSD. By enabling traders to speculate on assets like Bitcoin without owning them, perpetual futures quickly became a staple in crypto trading. Today, they’re widely available on exchanges like Millionero, allowing traders to capitalize on market volatility.

3. Key Differences Between Perpetual, Traditional Futures, and Spot Trading

While perpetuals and traditional futures share similarities, perpetuals trading differs significantly from both traditional futures and spot trading:

• Expiration Date:
  • Perpetual Futures: No expiration date, so positions can remain open indefinitely.
  • Traditional Futures: Set expiration date, requiring traders to settle or close positions by a specified date.
  • Spot Trading: No contract involved; you directly buy or sell the asset at the current market price.
• Leverage:
  • Perpetual and Traditional Futures: Both allow leverage, enabling traders to control larger positions with a smaller capital outlay.
  • Spot Trading: Typically does not involve leverage; you pay for the full asset value upfront.
• Ownership:
  • Perpetual and Traditional Futures: No ownership of the underlying asset. You’re speculating on price movements only.
  • Spot Trading: You own the asset outright, making it available to sell, transfer, or hold.
• Funding Rate (unique to perpetual futures): A small fee exchanged between long and short positions every few hours to align contract prices with market prices. This fee mechanism doesn’t exist in traditional futures or spot trading.

4. How the Funding Rate Works

The funding rate is a critical part of perpetuals trading, helping to keep the contract price close to the actual market value:

• When the Contract Price is Higher: If the perpetual price trades above the spot price, those with “long” positions (betting the price will rise) pay a fee to those with “short” positions (betting it will fall).
• When the Contract Price is Lower: If the perpetual trades below the spot price, short positions pay the funding fee to long positions.

These fees are typically exchanged every few hours, incentivizing traders to balance positions and keep the contract price in line with the market.

5. Why Trade Perpetuals?

Perpetuals trading offers several potential advantages:

• Flexibility: With no expiration dates, traders can keep positions open as long as desired.
• Leverage: Amplifies trading power by allowing traders to hold larger positions than their actual capital.
• Profit from Both Rising and Falling Markets: By going long or short, traders can potentially benefit regardless of whether the market is bullish or bearish.

6. How to Trade Perpetuals on Millionero

Ready to start perpetuals trading? Here’s a quick guide to trading perpetual futures on Millionero:

• Sign Up and Fund Your Account: Open an account on Millionero and deposit funds to meet both initial and maintenance margin requirements.
• Choose Your Trading Mode:
  • Isolated Mode: Limits risk by isolating the funds you allocate to a single position, so you won’t risk more than what’s assigned to that position.
  • Cross Mode: Uses all available funds in your account to maintain a position, adding flexibility but increasing risk since the entire account balance could be affected.
  • Max Mode: For experienced traders, Max Mode maximizes leverage and minimizes margin across multiple trades, providing more control over larger positions but requiring careful risk management.
• Monitor Funding Rates: Since funding fees impact your profits and losses, tracking these rates is crucial.

Leverage Risk Management Tools:

 Millionero offers tools like stop-loss and take-profit, estimated-profit and estimated-loss orders to help automate risk control and manage leverage. We also offer Auto-hedging and hedge positions features.

Setting TP/SL (Take Profit/Stop Loss)

Take Profit (TP) and Stop Loss (SL) are essential risk management tools. With these, you can automate the closure of positions at desired profit or loss levels. This helps you minimize risk and lock in profits.

Steps to Add TP/SL:

1. On the trading interface, click the Add TP/SL option.
2. Input your desired Take Profit and Stop Loss price levels.
3. Confirm your settings.

Example for Long Position:

• Current Price: $96,504
• Take Profit: $100,000
• Stop Loss: $90,000
• Expected P&L (if TP is reached): $360.81
• Expected P&L (if SL is reached): -$676.25
• You can follow the same process but reversed prices if going short.

Using EP/EL (Estimated Profit/Estimated Loss)

EP/EL allows traders to set predefined profit or loss values in dollar terms rather than price levels, simplifying the management of trades.

Steps to Set EP/EL:

1. Select the Add EP/EL option in the position management panel.
2. Enter your desired profit (EP) and loss (EL) values.
3. Confirm to apply.
4. You can follow the same process for Short Position.

Example:

• Estimated Profit (EP): +$1,000.00 at $106,726.43
• Estimated Loss (EL): -$500.00 at $92,163.43

Automatic Hedging

Automatic Hedging protects your portfolio by dynamically balancing unhedged positions. It is especially useful for managing risks during highly volatile markets.

How It Works:

• Automatically opens opposite positions for unhedged trades.
• Only works when leverage is below 70x.

Steps to Enable:

1. Open the Trade Settings menu.
2. Toggle Automatic Hedging to ON.
3. Adjust settings to suit your trading strategy.

Note: Auto hedging is not available in Isolated Mode.

Hedge Position

Hedge Position allows you to manually offset existing trades by taking opposite positions, reducing potential losses.

Steps to Hedge a Position:

1. Go to the Open Positions tab.
2. Click the Hedge Position button next to the trade.
3. Confirm the hedge in the pop-up prompt.

Note: Hedging resets the estimated profit and loss, so you will need to reconfigure them.

7. The Risks of Perpetuals Trading

While perpetuals offer opportunities for substantial gains, they come with equally significant risks. Some reports indicate that 98% of perpetual traders lose money over time. The combined effects of high leverage and market volatility mean that even slight price movements can result in large losses, potentially exceeding your initial investment.

Disclaimer: Trading perpetuals is highly speculative, and losses can be substantial. If you choose to trade perpetual futures, you do so at your own risk, and nothing in this article is financial advice. Educate yourself thoroughly—start with additional resources at blog.millionero.com. For those prepared to proceed responsibly, our platform provides a user-friendly experience to explore perpetuals trading on Millionero’s trading site.

Final Thoughts

Perpetuals trading provides a flexible way to engage with the crypto market, offering unique strategies for those willing to handle the associated risks. Perpetuals trading gives an opportunity to maximize your gains, however, the potential for loss is high, especially when using leverage. At Millionero, we strongly recommend developing a solid risk management strategy and trading only with funds you can afford to lose.