Benefits of Perpetual Trading: A Complete Guide - NFTFN

Trading

TL;DR Summary

  • In this complete guide to the Benefits of Perpetual Trading in 2023, we explore the freedom and flexibility that perpetual contracts offer.

  • From the absence of expiration dates to the adrenaline of leverage, perpetual trading is a 24/7 party.

  • Essential tips include starting small, embracing volatility, staying informed, monitoring funding rates, and not forgetting the basics.

  • FAQs cover suitability for beginners, the significance of leverage, and risk management. 

Introduction

Did you know that perpetual trading has outperformed traditional trading methods in recent years?

Yes, that’s right! A study by Messari Research found that perpetual trading volumes grew 14x in 2022, outpacing the growth of traditional trading volumes, which grew 3x in the same year. 

Perpetual trading is often hailed as the unsung hero of the trading world. In this guide, we'll unravel the mysteries surrounding perpetual trading, explore its myriad benefits, and equip you with essential tips to ride the perpetual wave successfully.

What is Perpetual Trading

Unlike traditional spot trading, where you buy and hold an asset, perpetual trading allows you to speculate on the cryptocurrency's price without actually owning it. In simpler terms, you're betting on whether the price will go up or down without having to buy and hold the underlying asset.

Perpetual trading is unlike traditional futures contracts that have fixed expiration dates. Perpetual contracts have no such constraints. They're the free spirits of the trading world, allowing you to enter and exit positions at your whim. 

The Nuts and Bolts

Perpetual contracts mirror the spot market closely, maintaining a price that tracks the underlying asset. They eliminate the hassle of constantly rolling over contracts, making them a seamless choice for traders seeking flexibility and prolonged exposure.

To delve into a comprehensive understanding of perpetual trading and how it works, explore our previous article

What are the Benefits of Perpetual Trading

Now, let's delve into the benefits that perpetual trading offers to beginners like you, eager to make a mark in the trading universe.

1. Unfettered Freedom

Perpetual contracts throw away the shackles of fixed expiration dates. You're not confined to a predetermined timeframe, giving you the freedom to dance with the market at your own pace.

2. Leverage Like a Maverick

Feeling the adrenaline rush of trading with leverage? Perpetual contracts amplify this sensation. With the ability to trade with higher leverage compared to traditional futures, you can magnify your gains (and losses) like a high-stakes poker game. Just remember, with great power comes great responsibility!

3. No Rollover Hassles

Bid farewell to the tedious task of rolling over contracts. Perpetual contracts automatically renew, sparing you the headache of monitoring and managing expirations. It's trading on autopilot, allowing you to focus on what truly matters – making profitable decisions.

4. The Market's 24/7 Party

Ever felt the FOMO (Fear Of Missing Out) when the market is buzzing while you're catching some Zs? Perpetual trading is your remedy. With no downtime, you can jump into the action whenever suits your schedule. It's a 24/7 party!

5. Risk Management Magic

Perpetual contracts offer a unique risk management mechanism with funding rates. These rates ensure that the contract price stays close to the underlying asset's spot price. This built-in safety net helps mitigate the risks associated with sudden market fluctuations, providing a smoother trading experience.

5 Tips While Trading Perpetual

While embarking on your perpetual trading journey. pay close attention to these essential tips to navigate the twists and turns of the perpetual rollercoaster.

1. Start Small, Dream Big

In the world of perpetual trading, small steps can lead to giant leaps. Begin with a modest position size and gradually scale up as you gain confidence. Remember, Rome wasn't built in a day, and neither is a successful trading career.

2. Embrace Volatility, but Don't Marry It

Volatility is the heartbeat of perpetual markets. While it can be exhilarating, don't let it sweep you off your feet. Use volatility to your advantage, but never forget to have a solid risk management strategy in place. A wild ride is fun, but a controlled one is profitable.

3. Stay Informed, Not Overwhelmed

Knowledge is power in the trading world. Stay informed about market trends, news, and key indicators, but avoid drowning in information overload. Find a balance that keeps you aware without overwhelming your decision-making process.

4. Keep an Eye on Funding Rates

Funding rates may seem like a minor detail, but they can have a significant impact on your trades. Monitor them closely to understand market sentiment and make informed decisions. It's the little things that often make the biggest difference.

5. Don't Ignore the Basics

In the pursuit of perpetual glory, don't neglect the fundamentals. Solidify your understanding of market analysis, technical indicators, and risk management. The basics are your compass in the vast sea of perpetual trading.

FAQs

Q: Is perpetual trading suitable for beginners?

Not exactly, but perpetual trading's flexibility and simplicity make it easier to learn and begin the journey. Just start small, grasp the basics, and you'll find yourself comfortably riding the perpetual wave.

Q: How do funding rates work in perpetual contracts?

Funding rates are periodic payments between long and short positions, helping keep the contract price aligned with the spot price. Positive rates benefit shorts, while negative rates favor longs, balancing the perpetual equilibrium.

Q: Can I trade perpetual contracts at any time?

Yes, indeed! Perpetual contracts operate 24/7, allowing you to trade whenever it suits your schedule. Say goodbye to missing out on market opportunities due to time constraints.

Q: What is the significance of leverage in perpetual trading?

Leverage amplifies both gains and losses in perpetual trading. While it offers the potential for higher profits, it also increases the risk. Use leverage cautiously and be aware of its impact on your trading strategy.

Q: How do I manage risk in perpetual trading?

Utilize the inherent risk management features of perpetual contracts, such as funding rates. Additionally, implement a solid risk management strategy, including setting stop-loss orders and diversifying your portfolio.

Conclusion

There you have it, traders! The benefits of perpetual trading are within your grasp. From the freedom of endless contracts to the thrill of leverage, perpetual offers a unique journey in the trading universe. Remember, success in perpetual trading is a blend of knowledge, strategy, and a sprinkle of risk-taking. So, gear up, dive in, and may your perpetual journey be as prosperous as the markets are volatile!

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