How to trade Kraken contract

By understanding margin trading concepts and following this comprehensive guide, you can navigate Kraken's contract trading platform and maximize your trading opportunities while managing risks effectively.

Nov 10, 2024 at 07:27 am

Comprehensive Guide to Kraken Contract Trading: A Step-by-Step Walkthrough

Kraken is a leading cryptocurrency exchange renowned for its advanced trading platform, which includes a suite of contract trading features. Whether you're a seasoned trader or just starting your crypto trading journey, this comprehensive guide will equip you with the knowledge and skills to navigate the Kraken contract platform efficiently.

Step 1: Understanding Margin Trading Concepts

Before venturing into contract trading on Kraken, it's essential to grasp the fundamental principles of margin trading. Margin trading allows traders to increase their potential profits by borrowing funds to trade, thereby amplifying their market exposure. However, it also amplifies potential losses, so it's crucial to fully understand the risks involved:

• Margin: The amount of funds you borrow from Kraken to trade with, expressed as a percentage of your account balance. Higher margin allows for greater leverage and trading power.
• Leverage: The ratio between borrowed and personal funds used in a trade. For example, a 5x leverage signifies that you're trading with 5 units of borrowed funds for every 1 unit of your own funds.
• Liquidation: When the market moves against your position and your account equity falls below a certain threshold set by Kraken, your position will be automatically liquidated to cover your outstanding margin loan.

Step 2: Creating a Kraken Account

To access Kraken's contract trading platform, you need to create an account on the exchange. The process is straightforward:

• Visit the Kraken website (www.kraken.com) and click on "Create Account."
• Fill out the registration form, providing your personal details and email address.
• Verify your email address and complete the account setup process.
• Once your account is created, you'll need to pass Kraken's verification process to activate margin trading. This process typically involves submitting identity documents and proof of address.

Step 3: Funding Your Kraken Account

Before you can start trading contracts, you need to fund your Kraken account with cryptocurrency. You have several options for depositing funds:

• Cryptocurrency Deposit: You can transfer funds from an external crypto wallet to your Kraken account using the deposit address provided on the platform.
• Bank Transfer: Kraken supports bank transfers for fiat currencies like USD and EUR. However, processing times may vary depending on your bank and payment method.
• Credit/Debit Card: You can instantly purchase cryptocurrency using a credit or debit card on Kraken, but fees may apply.

Step 4: Opening a Contract Trading Position

Once your account is funded, you're ready to trade contracts on Kraken. Follow these steps:

• Navigate to the "Futures" section of the Kraken platform.
• Choose the contract you want to trade, such as BTCUSD or ETHUSD.
• Select the contract size you desire.
• Set your trade parameters, including the order type, leverage, and target price.
• Click on "Buy" or "Sell" to open your contract position.

Step 5: Managing Your Contract Position

Once you've opened a contract position, you need to monitor it closely and manage it effectively to maximize your profits and minimize losses:

• Mark Price: This represents the current market price of the underlying asset and is used to determine the unrealized profit or loss of your position.
• Unrealized Profit/Loss (PnL): This is the difference between the current market price and the price at which you opened your position. A positive PnL means a profit, while a negative PnL signifies a loss.
• Liquidation Price: This is the price at which your position will be automatically liquidated if it moves against you. You can adjust the liquidation price by increasing or decreasing your margin.
• Closing a Position: When you're ready to close your position, you can place a market or limit order in the opposite direction. For example, if you opened a long position, you would place a short position to close it.