How to play perpetual contract on Huobi

On Huobi, perpetual contracts offer traders the opportunity to speculate on the future price of cryptocurrencies like Bitcoin and Ethereum, providing both potential profits and risks.

Nov 18, 2024 at 02:21 am

A Comprehensive Guide to Perpetual Contract Trading on Huobi

Perpetual contracts, also known as perpetual futures or inverse futures, are a type of financial derivative that allows traders to speculate on the future price of an underlying asset without having to take physical delivery of the asset. They are similar to traditional futures contracts, but with some key differences. First, perpetual contracts do not have an expiration date, meaning that they can be held indefinitely. This makes them well-suited for long-term trading strategies. Second, perpetual contracts are typically traded with leverage, which amplifies both profits and losses. This makes them a potentially lucrative but also risky trading instrument.

Huobi is one of the world's leading cryptocurrency exchanges, and it offers a wide range of perpetual contracts for its users. In this guide, we will show you how to trade perpetual contracts on Huobi, including how to open and close a position, how to use leverage, and how to manage your risk.

Step 1: Choose a Perpetual Contract

The first step is to choose a perpetual contract to trade. Huobi offers a wide range of perpetual contracts, including contracts for Bitcoin, Ethereum, Litecoin, and many other cryptocurrencies. When choosing a contract, it is important to consider the following factors:

• The underlying asset: The underlying asset is the cryptocurrency that the contract is based on. It is important to choose an asset that you are familiar with and that you believe is likely to move in a favorable direction.
• The leverage: The leverage is the amount of money that you borrow to trade with. It is important to choose a leverage level that is appropriate for your risk tolerance and trading experience.
• The funding rate: The funding rate is the fee that you pay or receive to hold a position in a perpetual contract. The funding rate can be positive or negative, and it can affect your profitability.

Step 2: Open a Position

Once you have chosen a perpetual contract, you can open a position. To do this, you need to specify the following:

• The direction of your trade: You can either buy a long position or sell a short position. A long position is a bet that the price of the underlying asset will increase, while a short position is a bet that the price of the underlying asset will decrease.
• The amount of leverage: You can choose to trade with leverage or without leverage. If you choose to trade with leverage, you will be able to amplify your profits and losses.
• The order type: You can choose to place a market order or a limit order. A market order will be executed at the current market price, while a limit order will only be executed if the price reaches a certain level.

Step 3: Manage Your Position

Once you have opened a position, it is important to manage your risk. You can do this by using stop-loss orders and take-profit orders.

• Stop-loss orders: A stop-loss order is an order that is placed to automatically close your position if the price of the underlying asset moves against you. This can help you to limit your losses.
• Take-profit orders: A take-profit order is an order that is placed to automatically close your position if the price of the underlying asset moves in your favor. This can help you to lock in your profits.

Step 4: Close Your Position

When you are ready to close your position, you can do so by placing an order to buy or sell the same number of contracts that you originally sold or bought. This will close your position and you will receive or pay the difference between the opening and closing prices.

Conclusion

Perpetual contracts are a powerful trading instrument that can be used to speculate on the future price of a cryptocurrency. However, it is important to remember that they are also a risky trading instrument. It is important to understand the risks involved and to manage your risk carefully.