LBank contract trading rules

Understanding and adhering to LBank's comprehensive contract trading rules, including margin management, risk management, funding rates, and trading fees, is essential for successful contract trading on the exchange.

Nov 22, 2024 at 08:59 pm

LBank Contract Trading Rules: A Comprehensive Guide

Introduction

Contract trading on LBank, a globally renowned cryptocurrency exchange, offers traders a suite of features and trading instruments to capitalize on market fluctuations. Understanding the platform's contract trading rules is crucial for successful navigation and risk management. This extensive guide delves into the key elements of LBank's contract trading rules, empowering traders with a thorough grasp of the platform's operations.

Step 1: Opening a Contract Trading Account

• Register an LBank account and complete KYC verification.
• Fund your account with supported cryptocurrencies or fiat currencies.
• Navigate to the "Contracts" tab on the LBank website or mobile app.
• Select the contract type you wish to trade (USDT-margined contracts or coin-margined contracts).
• Choose the desired trading pair (e.g., BTC/USDT, ETH/USDT).

Step 2: Understanding Contract Specifications

• Contract Size: Represents the value of the underlying asset per contract.
• Tick Size: The minimum price change for a contract.
• Minimum Trading Quantity: The smallest amount of a contract that can be traded.
• Leverage: Allows traders to multiply their potential returns, but also increases risk. Leverage options vary from 1x to 125x.
• Funding Rate: A periodic adjustment made to contract holders based on the difference between contract price and spot price.
• Order Types: LBank supports various order types, including Market Orders, Limit Orders, Stop-Limit Orders, and Trailing Stop Orders.

Step 3: Placement and Execution of Orders

• Market Orders: Executed immediately at the best available price, but offer less price control.
• Limit Orders: Allow traders to specify a desired price for order execution, providing greater price control but risking delayed execution.
• Stop-Limit Orders: Combine stop orders (to enter a trade when a specific price is reached) with limit orders (to specify the execution price).
• Trailing Stop Orders: Automatically adjust stop loss levels based on price movements, protecting profits and minimizing losses.
• Order Matching: Orders are matched based on price and time priority, eliminating front-running and ensuring fair market conditions.

Step 4: Margin Management

• Margin: The collateral that traders must maintain to open and hold positions.
• Initial Margin: The minimum margin required to open a position.
• Maintenance Margin: The margin level below which additional margin must be added to maintain the position.
• Liquidation: If the margin level falls below the maintenance margin, the position will be forcibly closed, resulting in potential losses.
• Auto-Deleveraging (ADL): A mechanism that automatically reduces leverage during extreme market conditions, preventing catastrophic losses.

Step 5: Risk Management and Leverage

• Leverage: Trading with leverage magnifies both potential profits and losses. While higher leverage increases potential rewards, it also amplifies the risk of significant losses.
• Risk-to-Reward Ratio: The ratio between potential profit and potential loss, indicating the balance between risk and potential reward.
• Stop Loss Orders: Limit potential losses by automatically closing trades when a predefined price level is reached.
• Take Profit Orders: Secure profits by automatically closing trades when a target profit level is reached.

Step 6: Funding Rate and Funding Settlements

• Funding Rate: A premium or discount applied to perpetual contracts, ensuring that they track the spot price. It is calculated based on the interest rate differential between the contract and the spot market.
• Funding Settlement: Occurs every 8 hours, at which time funding payments are exchanged between traders holding long and short positions.
• Long Traders: Pay the funding rate to short traders if the contract price is above the spot price.
• Short Traders: Receive the funding rate from long traders if the contract price is below the spot price.

Step 7: Trading Fees and Commissions

• Trading Fee: A percentage charge levied on each trade, varying based on the trading pair and market maker/taker status.
• Overnight Funding Fee: A small fee charged for holding positions overnight, calculated based on the contract's funding rate.
• Withdrawal Fee: A transaction fee charged for withdrawing funds from the LBank exchange.
• Referral Fee: Traders can earn a commission by referring new users to the LBank platform.