Bybit currency-based contract tutorial

In Bybit's currency-based contracts, traders speculate on crypto price movements against a stablecoin, with positions settling in the quoted currency (USDT or BUSD), ensuring enhanced liquidity and reduced volatility.

Nov 19, 2024 at 02:48 pm

Bybit Currency-Based Contract Tutorial

Step 1: Understanding Currency-Based Contracts

• Currency-based contracts, also known as inverse perpetual contracts, are derivative instruments that allow traders to speculate on the price movements of cryptocurrencies against a stablecoin, typically USDT or BUSD.
• Unlike traditional futures contracts, which settle in the underlying asset, currency-based contracts settle in the quoted currency, providing increased liquidity and reduced volatility.
• Traders can take long or short positions on these contracts, betting on whether the price of the cryptocurrency will rise or fall against the stablecoin.

Step 2: Choosing a Currency-Based Contract

• Bybit offers a wide range of currency-based contracts, each based on a different cryptocurrency pair.
• Popular pairs include BTC/USDT, ETH/USDT, and LINK/USDT.
• Traders should consider the volatility and liquidity of each pair before selecting a contract.

Step 3: Funding Your Account

• To trade currency-based contracts on Bybit, traders must first fund their accounts.
• Bybit supports various funding methods, including cryptocurrencies, credit/debit cards, and bank transfers.
• Once funds are deposited, traders can transfer them to their trading account.

Step 4: Opening a Position

• To open a long position, traders need to buy the contract.
• To open a short position, traders need to sell the contract.
• The position size represents the number of contracts traded and determines the potential profit or loss.

Step 5: Managing Risk with Leverage and Stop-loss

• Bybit offers leverage of up to 100x on currency-based contracts, which can amplify both profits and losses.
• It is crucial to use leverage wisely and set appropriate stop-loss orders to manage risk.
• Stop-loss orders automatically close positions when the price reaches a predetermined level, preventing excessive losses.

Step 6: Monitoring and Settling Positions

• Traders can monitor their open positions in the "Positions" section of the Bybit interface.
• Positions can be closed manually or through take-profit or stop-loss orders.
• Upon closing a position, gains or losses are settled in the quoted currency.