How to play perpetual contract in Kraken

To mitigate risks associated with perpetual contracts, traders should thoroughly understand margin trading, exercise caution in volatile markets, and use stop-loss orders to manage potential losses.

Nov 15, 2024 at 09:04 pm

How to Play Perpetual Contract in Kraken

Perpetual contracts, also known as perpetual futures, are a type of financial instrument that allows traders to speculate on the future price of an underlying asset without having to take physical delivery of the asset. Perpetual contracts are traded on a decentralized exchange, which means that they are not subject to the same regulations as traditional futures contracts. This makes them a more accessible and flexible trading instrument, but it also comes with some unique risks.

If you're new to perpetual contracts, it's important to understand how they work before you start trading. Here's a step-by-step guide to help you get started:

1. Choose a Cryptocurrency Exchange

The first step is to choose a cryptocurrency exchange that offers perpetual contracts. There are a number of different exchanges to choose from, so it's important to do your research and find one that meets your needs. Some of the most popular exchanges for perpetual contracts include:

• Binance
• Huobi
• OKEx
• ByBit
• FTX (not included)

2. Create an Account

Once you've chosen an exchange, you'll need to create an account. This process usually involves providing your name, email address, and a password. You may also need to verify your identity by providing a government-issued ID.

3. Fund Your Account

Once your account is created, you'll need to fund it with cryptocurrency. You can do this by depositing cryptocurrency from another wallet or by purchasing cryptocurrency directly from the exchange.

4. Choose a Perpetual Contract

Once your account is funded, you can start trading perpetual contracts. The first step is to choose the underlying asset that you want to trade. Perpetual contracts are available for a variety of different assets, including cryptocurrencies, commodities, and fiat currencies.

5. Set Your Trading Parameters

Once you've chosen an underlying asset, you'll need to set your trading parameters. This includes specifying the size of your position, the leverage you want to use, and the stop-loss and take-profit levels.

6. Place Your Trade

Once you've set your trading parameters, you can place your trade. To do this, simply click the "Buy" or "Sell" button on the exchange's trading interface.

7. Monitor Your Position

Once your trade is placed, it's important to monitor your position closely. This includes tracking the price of the underlying asset and adjusting your trading parameters as needed.

8. Close Your Position

When you're ready to close your position, you can do so by clicking the "Close" button on the exchange's trading interface.

Risks of Perpetual Contracts

Perpetual contracts can be a profitable trading instrument, but they also come with some unique risks. These risks include:

• Margin Trading: Perpetual contracts are traded on margin, which means that you can lose more money than you initially invested.
• Volatility: The price of the underlying asset can be volatile, which can lead to large losses.
• Liquidation: If the price of the underlying asset moves against you, your position may be liquidated.
• Gaps: Perpetual contracts trade 24/7, which means that there may be large gaps in the price of the underlying asset when the market reopens.
• Scams: There are a number of scams associated with perpetual contracts. It's important to do your research and only trade with reputable exchanges.