Tutorial on Kraken currency-based contracts

Kraken offers currency-based contracts, enabling traders to speculate on crypto prices without acquiring the underlying assets, with various contract options and risk management tools to safeguard profits during volatile market conditions.

Nov 14, 2024 at 09:23 pm

Tutorial on Kraken Currency-Based Contracts

Kraken is one of the leading cryptocurrency exchanges in the world, and it offers a variety of trading options, including currency-based contracts. These contracts allow traders to speculate on the future price of a cryptocurrency without having to own the underlying asset.

In this tutorial, we'll walk you through the steps of how to trade currency-based contracts on Kraken. We'll cover everything from choosing a contract to placing an order and managing your risk.

Step 1: Choose a Contract

The first step is to choose a contract to trade. Kraken offers a variety of contracts based on different cryptocurrencies, including Bitcoin, Ethereum, and Litecoin. You can also choose from different contract lengths, from one day to one year.

When choosing a contract, it's important to consider the following factors:

• The underlying cryptocurrency: What cryptocurrency is the contract based on?
• The contract length: How long does the contract last?
• The strike price: What is the price at which you can buy or sell the underlying cryptocurrency?
• The premium: What is the cost of the contract?

Step 2: Place an Order

Once you've chosen a contract, you can place an order. You can do this through Kraken's website or mobile app.

To place an order, you'll need to specify the following information:

• The order type: Are you buying or selling the contract?
• The order quantity: How many contracts do you want to buy or sell?
• The order price: What price do you want to buy or sell the contract at?

You can also specify a stop-loss order or a take-profit order. A stop-loss order will automatically sell your contract if the price falls below a certain level, while a take-profit order will automatically sell your contract if the price rises above a certain level.

Step 3: Manage Your Risk

Once you've placed an order, it's important to manage your risk. The price of cryptocurrencies can fluctuate rapidly, so it's important to have a plan in place to protect your profits.

There are a number of ways to manage your risk, including:

• Using stop-loss orders and take-profit orders
• Diversifying your portfolio
• Trading with a small amount of capital

Step 4: Close Your Position

When you're ready to close your position, you can do so by placing an opposite order. For example, if you bought a contract, you would sell the same number of contracts to close your position.

You can also close your position by exercising the contract. This means that you will buy or sell the underlying cryptocurrency at the strike price.

Step 5: Withdraw Your Funds

Once you've closed your position, you can withdraw your funds from Kraken. You can do this by following the steps outlined in Kraken's Withdrawal Guide.

Conclusion

Trading currency-based contracts on Kraken is a great way to speculate on the future price of cryptocurrencies. However, it's important to understand the risks involved and to manage your risk accordingly.