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Perpetual trade tutorial

26 min. readlast update: 03.18.2025

Introduction to Perpetual Contracts

 

 

What is a Perpetual Contract?

A perpetual contract is a type of futures contract that does not have a set expiration date and can be held indefinitely. This allows users to profit from price movements in digital assets by going long (buying) or short (selling) based on their market predictions.

 

 

Main Points Overview

 

  • Expiration Date : 
  • Traditional delivery contracts have a fixed expiration date, with the delivery price being the arithmetic average of the US dollar index for the last hour of the underlying asset (e.g., BTC, LTC).
  • Perpetual contracts, however, have no expiration date and do not expire.

 

  • Capital Costs:
  • Without an expiration date, perpetual contracts use a "funding fee mechanism" to anchor the exchange price to the contract price.
  • Marked Price:
  • Perpetual contracts use the marked price to calculate unrealized profit and loss. This helps reduce unnecessary liquidations due to market fluctuations.
  • Settlement Every Minute:
  • Unrealized profits and losses are settled every minute, converting them into realized profits and losses. This improves the flexibility of fund usage.
  • Ladder Maintenance Margin Rate System:
  • The maintenance margin rate is the minimum margin rate required to maintain a current position.
  • If the margin rate falls below the maintenance margin rate and closing fee rate, it triggers liquidation or partial position reduction.
  • The larger the user's position, the higher the maintenance margin rate, and the lower the maximum leverage multiple available.
  • Force Partial Balancing:
  • For users with large positions, if the margin rate falls below the current gear maintenance margin rate plus the closing fee rate but remains above the minimum gear maintenance margin rate plus the closing fee rate, the entire position will not be liquidated directly.
  • The system will calculate the necessary reduction to decrease the position by two gears and partially reduce the position.
  • If, after a partial reduction, the margin rate meets the new gear's maintenance margin rate requirements, the reduction stops. If not, the partial reduction process continues.
  • During forced partial reduction, the position or the currency account of the perpetual contract is frozen, preventing further operations.

Funding Rate

The funding rate is the price rebalancing mechanism of the perpetual contract. Unlike traditional futures, which need to be delivered upon expiration, perpetual contracts have no expiration or delivery. Thus, the funding rate mechanism anchors the futures price to the spot price.

Funding Fee Settlement Rules

  • Settlement Frequency: Every 8 hours (3 times a day) at 00:00, 08:00, and 16:00 (GMT+8).
  • Charge or Pay: Only users holding positions at the time of settlement will either charge or pay funding fees. Positions closed before settlement do not incur funding fees.
  • Determination: At settlement, the funding fee depends on the current funding rate and the user's position:
  • Positive Funding Rate: Long positions pay, and short positions receive the funding fee.
  • Negative Funding Rate: Long positions receive, and short positions pay the funding fee.
  • Mechanism: Funding fees are settled between users, not the platform.

Example:

  • If Bitcoin's price rises, with a futures price of $70,000 and a spot price of $69,500, the funding rate might be 0.15%. Long positions would pay 0.15% of their nominal value to short positions every 8 hours. This incentivizes short-selling, causing the futures price to decrease and align with the spot price.

Funding Fee Calculation

  • Formula: Funding Fee = Position Value * Funding Rate
  • Position Value: Position Size * Contract Size * Mark Price
  • Settlement: Added or deducted directly from the position margin.

Funding Rate Calculation

The funding rate consists of two components: the composite rate and the premium.

 

Composite Rate

  • Components:
  • Underlying Currency Interest Rate: Daily lending rate of the underlying currency (e.g., BTC for BTCUSDT).
  • Quote Currency Interest Rate: Daily lending rate of the quote currency (e.g., USDT for BTCUSDT).
  • Formula: Composite Rate = (Quote Currency Interest Rate - Underlying Currency Interest Rate) / Funding Rate Settlement Frequency
  • Currently: 0.06% (quote currency) - 0.03% (underlying currency) / 3 settlements = 0.01%

Premium Index

  • Premium Measurement: Reflects the premium of the contract relative to its reasonable price.
  • Calculation: Higher premium increases the funding rate, while a lower premium decreases it.

Funding Rate Basis Rate

  • Formula: Funding Rate Basis Rate = Funding Rate of the Current Period * (Time Interval to Settlement / Settlement Cycle)
  • Example:
  • Current BTC perpetual contract funding rate: 0.01%.
  • Current time: 08:30, settlement time: 16:00 (7 hours 30 minutes to settlement).
  • Calculation: 0.01% * (450 / 480) = 0.009375%.

Reasonable Price

  • Calculation: Reasonable Price = Index Price * (1 + Funding Rate Basis Rate)
  • Example:
  • BTC Index Price: 10,000 USDT, Funding Rate Basis Rate: 0.005%.
  • Calculation: 10,000 * (1 + 0.005%) = 10,000.5 USDT.

Depth-Weighted Bid/Ask Price

  • Depth-Weighted Bid Price: Average buy order price for cumulative pending order volume reaching 8,000 USDT.
  • Depth-Weighted Ask Price: Average sell order price for cumulative pending order volume reaching 8,000 USDT.

Premium Index

  • Calculation:
  • Formula: Premium Index = [ Max (0, Depth-Weighted Bid Price - Reasonable Price) - Max (0, Reasonable Price - Depth-Weighted Ask Price) ] / Index Price + Funding Rate Basis Rate

Average Premium Index

  • Calculation: Arithmetic mean of all premium indices in the last hour.
  • Example: From 08:00 to 09:00, the average premium index at 08:30 is the mean of all premium indices from 07:30 to 08:30.

Final Funding Rate Calculation

  • Formula: Funding Rate = clamp (Average Premium Index + clamp (Composite Rate - Average Premium Index, Premium Deviates Upper Limit, Premium Deviates Lower Limit), Funding Rate Upper Limit, Funding Rate Lower Limit)
  • Clamp Function: Ensures the calculated rate stays within specified bounds.

Example:

  • Composite Rate: 0.01%, Average Premium Index: 0.005%.
  • Calculation: Clamp(0.005% + Clamp(0.01% - 0.005%, Upper Limit, Lower Limit), Funding Rate Upper Limit, Funding Rate Lower Limit).

By understanding the funding rate and its components, traders can better navigate the perpetual contracts and manage their positions effectively.

 

USDT Perpetual Contract Introduction

 

Margin

The USDT standard perpetual contract uses USDT as collateral for all contract types. Users only need to hold USDT to participate in trading any variety of contracts. In contrast, currency-based perpetual contracts require users to hold the underlying currency as collateral. For example, to trade a BTC/USD currency standard perpetual contract, users need to hold BTC as a secured asset.

 

Due to the different collateral currencies, the risk of asset depreciation varies between the two contracts when prices fall. For instance, if the price of BTC/USD decreases, more BTC is required to maintain the position in a currency standard perpetual contract. However, in a USDT standard perpetual contract, the value of the USDT collateral remains unaffected by BTC price fluctuations.

 

Valuation Unit

  • USDT Standard Perpetual Contract: Denominated in USDT.
  • Currency Standard Perpetual Contract: Denominated in US dollars (USD).

The index prices differ between the two types. For example:

  • BTC/USDT Index Price: Based on the BTC spot price in USDT across various exchanges.
  • BTC/USD Index Price: Based on the BTC spot price in USD across various exchanges.

Contract Face Value

  • USDT Standard Perpetual Contract: The face value corresponds to the underlying currency. For example, BTC/USDT has a face value of 0.001 BTC.
  • Currency Standard Perpetual Contract: The face value is in USD. For example, BTC/USD has a face value of $100.

Profit and Loss Currency

  • USDT Standard Perpetual Contract: Profit or loss is calculated in USDT.
  • Currency Standard Perpetual Contract: Profit or loss is calculated in the underlying currency. For example, trading the BTC/USD currency standard perpetual contract results in profit or loss in BTC.

 

Margin and profit/loss calculations

 

Open position margin

 

Open position margin is the minimum collateral amount required to open a position in a leveraged trade. The leverage multiple used by the trader is inversely proportional to the opening margin required to open a position. The higher the leverage, the less margin is required to open a position.

In a USDT perpetual contract, the opening margin is obtained by multiplying the principal value by the initial margin rate. The starting margin rate depends on the multiple of leverage used.

 

Open position margin= Contract quantity * entry price/leverage

 

Example:

Traders use 50x leverage to open a 1 BTC long order at $10,000.

Starting margin= (1 x 10,000)/ 50= 200 USDT

 

Average opening price

 

When an open position occurs, the average price of the open position is recalculated.

Example: Trader A now holds multiple positions of BTCUSDT long position 0.5, opening price of 5000 USD. An hour later, Trader A decides to open an additional 0.3 position at 6,000 USD.

Below are the formulas and calculation steps for the average opening average price:

  • Average open price= USDT total contract value/total contract quantity
  • Total contract value in USDT= [ (contract quantity 1 * price 1) + (contract quantity 2 * price 2)...]

We obtain the following data

The total value of the contract in USDT

=[(Contract quantity 1 x price 1) + ( contract quantity 2 x price 2)]

= [ (0.5 x 5000) + (0.3 x 6000) ]

= 4300

Contract total quantity

= 0.5 + 0.3

= 0.8 BTC

Average opening price

= 4300 / 0.8

= 5375

Profit/loss

After opening a position, the position and its profit and loss can be seen in real time in the position area.

Depending on the direction of your trade, the formula for calculating profit and loss is slightly different.

For multiple positions

Example:

Trader B now holds multiple positions of BTCUSDT long position 0.2, opening price of 7000 USDT. When the latest market price in the order table is shown as 7,500 USD, the unresolved profit and loss is displayed as 100 USDT.

Profit/loss= Contract quantity x (marked price - average opening price)

= 0.2 x (7500 - 7000)

= 100 USDT

For short positions

Example:

Trader C now holds a short position of BTCUSDT short position 0.4, opening price of 6000 USD. When the latest market price in the order table is shown as 5,000 USD, the unresolved profit and loss is displayed as 400 USDT.

Profit/loss= Contract quantity x (average opening price - marked price)

= 0.4 x (6000 - 5000)

= 400 USDT

 

Mark Price

 

What is a Marked Price?

 

The marked price is used to calculate a user's unrealized profit and loss and to trigger forced reduction during periods of market volatility. It helps improve market stability and reduce unnecessary forced liquidations when the market is abnormally volatile.

 

Marked Price Algorithm

 

Formula:

 

Marked Price=Median(Latest Price,Reasonable Price,Moving Average Price)Marked Price=Median(Latest Price,Reasonable Price,Moving Average Price)

 

Components:

  1. Latest Price:
  2. The Exchange's Median Price (Buy 1, Sell 1, Trade Price).
  3. Reasonable Price:
  4. Reasonable Price=Index Price×(1+Funding Rate of the Previous Period×(Time until Next Funding/Funding Interval)100)Reasonable Price=Index Price×(1+100Funding Rate of the Previous Period×(Time until Next Funding/Funding Interval))
  5. Moving Average Price:
  6. Moving Average Price=Index Price+5-Minute Moving Average of SpreadsMoving Average Price=Index Price+5-Minute Moving Average of Spreads
  7. Spread(𝑛)=Exchange’s Median Price(𝑛)−Index Price(𝑛)Spread(n)=Exchange’s Median Price(n)−Index Price(n)

 

Explanation

  • Latest Price: The median price from the exchange's Buy 1, Sell 1, and Trade prices.
  • Reasonable Price: Calculated using the index price and the funding rate. It considers the time remaining until the next funding rate is charged.
  • Moving Average Price: Combines the index price with the 5-minute moving average of the spreads to smooth out short-term fluctuations.

 

The marked price considers both the spot index price and the moving average of the base deviation. This moving average mechanism smooths out short-term fluctuations in contract prices, reducing unnecessary forced closings due to abnormal market volatility.

 

By using the marked price, traders can better manage their positions and minimize the impact of sudden market changes.

 

Index Price

 

The index price is derived from the latest transaction prices of standard currency pairs on mainstream exchanges. It represents the fair market price of the currency pair by calculating the median buy-to-sell prices, weighted averages, and other factors.

 

USDT Contract Index

 

Components and Weights:

Note: The data and indicator content may be adjusted in real-time according to market conditions without prior notice.

 

Data Sampling:

  • The latest prices from the exchanges are obtained through the API every 1 second.
  • The index is updated based on this interval.

 

Index Exception Handling

  1. Removing Invalid Prices:
  2. If a source exchange price is not updated within 40,000ms and differs significantly from the previous value, it is considered invalid, and its weight in the calculation is reset to 0.
  3. Abnormal Price Correction:
  4. If an exchange's price deviates significantly from others and the median deviation of all source exchange prices (including itself) by ±3%, the price is adjusted to the median ±3% of the sample exchange prices.
  5. For USDT prices, if the median deviation reaches ±3%, the same adjustment applies.

By using these methods, the index price aims to provide a reliable and fair representation of the market value for each currency pair.

 

 

Ladder Balancing Mechanism

 

What is Forced Balancing?

 

Forced balancing occurs when the margin rate, which measures the risk of position-guaranteed assets, approaches the minimum maintenance margin rate. When this happens, the system takes over the position to avoid liquidation due to illiquidity or market manipulation. The margin rate is calculated using the marked price.

 

Ladder Reduction Mechanism

 

To prevent large positions from significantly impacting market liquidity and causing large losses, the ladder mechanism reduces positions incrementally. Each ladder level corresponds to a different maintenance margin rate. When the system determines that the margin is insufficient for the current position, it reduces the position to the next level.

 

Forced Reduction Process

  1. Trigger Condition:
  2. When the margin rate is close to the minimum maintenance margin rate, the system intervenes.
  3. Initial Measures:
  4. Cancel all current orders for the specific contract.
  5. Trade the long and short positions of the contract.
  6. Margin Rate Check:
  7. If the margin rate is still below the current ladder maintenance margin rate after initial measures, forced reduction begins.
  8. Ladder Reduction:
  9. Reduce positions to the next gear to increase the margin rate above 0%.
  10. If the margin rate is still not above 0% in the lowest gear, all positions are liquidated.
  11. Restricted Operations:
  12. When a forced reduction is triggered, the user cannot perform contract-related operations.

 

Example with BTC

 

  1. Initial Position:
  2. User has a large position of 15,000 contracts, which is in gear 3 or above (positions >= 12,001).
  3. Monitoring:
  4. The system monitors the margin rate. If it falls below the required maintenance margin rate + closing fee rate, forced reduction starts.
  5. Calculation:
  6. Calculate positions to reduce: Current positions - maximum positions for gear 1 = 15,000 - 2,000 = 13,000.
  7. Forced Reduction:
  8. In restrictive position mode, the system places orders to reduce positions at prices slightly better than the latest closing price.
  9. During forced reduction, the user's position is frozen, and no contract-related operations can be performed.

By using the ladder balancing mechanism, the system can manage large positions more effectively, minimizing market impact and potential losses.

 

Insurance Fund

 

What is the Insurance Fund?

 

The insurance fund is designed to compensate for losses caused by liquidations in extreme market conditions, aiming to reduce the likelihood of users experiencing Auto-Deleveraging (ADL).

 

How are Insurance Funds Generated?

  • Liquidation Profits: When the liquidation engine takes over a user's position, it acquires the position and remaining margin at the bankruptcy price.
  • Profit Injection: If the liquidation engine closes the position at a price better than the bankruptcy price, the resulting profits are injected into the insurance fund.

 

How to Use Insurance Funds?

 

  1. Liquidation Takeover:
  2. During liquidation, the liquidation engine takes over the user's position and remaining margin at the bankruptcy price.
  3. Compensation and Calculation:
  4. The insurance fund compensates for a certain amount.
  5. The liquidation engine calculates the closing price for the taken-over position and submits a liquidation order at that price.
  6. Order Execution:
  7. If the order cannot be executed, ADL is triggered.
  8. Using the insurance fund makes it easier to close the position, reducing the likelihood of ADL for users.

Shared Insurance Fund

  • All perpetual contracts using the same margin currency share the same insurance fund.

By understanding the role and operation of the insurance fund, users can better appreciate the mechanisms in place to protect their positions during extreme market conditions.

 

 

Perpetual Contract User Guide

 

 

I. Enter Contract Trading

  1. Access the Contract Trading Page:
  2. Click on "Contract" on the home page to go to the Contract Trading page.
  3. Explore Contract Trading Page:
  4. Log in and familiarize yourself with various settings including contract information, submitted orders, order list, latest transactions, position records, depth charts, and more.
  5. The lower left section displays contract details, common trading issues, and index information for easy access.

II. Trading

 

1. Choosing Trading Pair

 

Select the trading pair in the trade pair switching area. Available options include USDT contracts, currency-based contracts, and mixed contract trading.

 

2. Funds Transfer

  • If funds are insufficient, transfer funds from your coin account to your contract account.
  • If the coin account lacks funds, recharge it or trade in Fiat currency.
  1. Contract Settings

Leverage:

  • Adjustable leverage up to 125x.

Full Position:

  • Uses all available balances as margin to avoid forced closing. Profitable positions can increase margin for loss-making positions. Default state is Full Position Margin.

Restricted Position:

  • Limits maximum loss to the starting margin. Isolates margin used in a position, limiting loss to the initial amount. Suitable for short-term speculative trading. Allows selection of leverage; higher leverage uses less margin.

 

4. Submit Order

Limit Order:

  • Specify the highest or lowest price for buying or selling. Reduces transaction costs but may not be confirmed if far from market price.

Market Order:

  • Confirmed immediately at current market price. Used for urgent trades. Only the opening value or the number of open positions need to be entered.

Conditional Order:

  • Executes buy/sell when the price reaches a specified trigger price. Can set TP/SL on existing positions or open positions at a specified price after the trigger.

High-End Limit Order:

  • PO (Post Only): Ensures the user is always Maker; may be canceled if matched with an existing value.
  • IOC (Immediate or Cancel): Any unsold parts of the order are canceled immediately.
  • FOK (Fill or Kill): The order is either completed immediately or canceled.

Buyer Buy Long:

  • Buy contracts if expecting price to rise. Similar to spot trading: buy first, sell later.

Seller Sell Short:

  • Sell contracts if expecting price to fall. Sell first, buy later to earn the difference.

Costs:

  • Open position cost = open position value / leverage.

III. Hold Positions

 

After opening positions, the current position list shows all trades. Key information includes:

Leverage Quantity:

  • Number of remaining open positions.

Cost Price:

  • Average opening price, recalculated for each new position.

Marked Price:

  • Uses a system to avoid unnecessary forced closings. Determines the balancing price and avoids sudden closings.

Forced Closing Price:

  • When marked price reaches the forced closing price, the system closes the position. Monitor risk and adjust margin accordingly.

Margin:

  • Margin = position value / leverage.

Key Points in Margin Trading:

  • Start Margin: Minimum required to open a position, representing leverage multiple.
  • Maintenance Margin: Minimum required to maintain a position, below which triggers forced closing.
  • Profit/Loss Rate: Calculated based on cost price and marked price, including realized and unrealized gains/losses.
  • Limit Closing: Requires filling in closing price and quantity.
  • Market Closing: Requires filling in the number of close positions.
  • Take Profit/Stop Loss: Set based on latest price and trigger price.

IV. Contract Settings

Position Type:

  • One-way and two-way positions. One-way allows only one direction; two-way allows both long and short positions simultaneously.

Order Confirmation Box:

  • Option to set up a secondary confirmation for trades.

Contract Unit:

  • Number of transaction units on the trading page, modifiable in the order area.

One-way and Two-way Positions

 

One-way Position Mode

In one-way position mode, a contract allows only one position in one direction. If a reverse opening action occurs, the existing position is closed before the new position is opened.

 

Example:

  • In a BTCUSDT contract, if you hold a long position of 1 BTC and then open a short position of 2 BTC, your position becomes a short position of 1 BTC.

Two-way Position Mode

In two-way position mode, a contract allows for holding positions in both long and short directions simultaneously. Opening a position in the opposite direction does not hedge risks. If the price moves in one direction, positions in the corresponding direction will be affected.

 

Example:

  • In a BTCUSDT contract, if you hold a long position of 1 BTC and then open a short position of 2 BTC, your position becomes a long position of 1 BTC and a short position of 2 BTC.

By understanding and utilizing these position modes, you can effectively manage your trades and strategies on the platform.

 

Conditional Order

 

A Conditional Order (Trigger Order) is activated only after a preset condition is met. Traders must specify a trigger price to activate the order. The system currently uses the latest deal price as the trigger condition.

 

Note: Before triggering, the conditional order does not have any margin requirements. Traders can place any conditional order successfully, but if the account lacks sufficient margin at the time of trigger, the order will fail.

 

Types of Conditional Orders

  1. Conditional Limit Order
  2. Limit orders enter the order book based on their order price once the price reaches the preset trigger price.
  3. Conditional Market Order
  4. When the price reaches the preset trigger price, the market order will be executed at the best available price.

Conditional Order Scenarios

 

Conditional orders are often used in the following scenarios:

  • Chasing Up: Set the trigger price above the current level to buy when the price rises above the trigger level.
  • Close Down: Set the trigger price below the current level to sell when the price falls below the trigger level.
  • Take Profit: Set the trigger price at the take profit level to close the position when the price reaches this level.
  • Stop Loss: Set the trigger price at the stop loss level to close the position when the price reaches this level.

Example

Chasing Scenario: Assume the current BTC price is $67,000. You predict that if BTC breaks through $70,000, it will rise to $80,000. If it doesn’t break $30,000, it will stay flat. You want to place an order: "If BTC price reaches $70,000, buy 1 BTC."

Since you can't monitor the price 24/7, you place a conditional order with the following parameters:

  • Trigger Price: $70,000
  • Order Direction: Buy High
  • Order Price: Market Price
  • Order Quantity: 1 BTC

The execution logic: The conditional order monitors the market price. When the price reaches $70,000, it submits a market order to buy 1 BTC. This market order is executed immediately, opening a buy position at around $70,000.

This scenario uses a conditional order to chase up. Similarly, conditional orders can be used to close down or for take profit and stop loss.

By setting these conditional orders, traders can automate their strategies and manage their positions without constantly monitoring the market.

 

Take Profit Stop Loss Order

 

A Take Profit Stop Loss Order allows traders to set a trigger price and order parameters in advance. When the market's latest trade price reaches the trigger price, the system will automatically place an order based on the specified parameters to close the position, thereby preserving profits or reducing losses.

 

Types of Take Profit Stop Loss Orders

  1. Limit Take Profit Stop Loss
  2. Market Take Profit Stop Loss

Limit Take Profit Stop Loss

Parameters:

  • Trigger Price
  • Order Price
  • Order Quantity

Function:

  • When the trigger price is reached, a limit order is placed. This specifies the highest price the user is willing to buy or the lowest price they are willing to sell.

Benefits:

  • Ensures the transaction price is within the limit price, controlling slippage.

Disadvantages:

  • The order may not be executed if the market does not reach the specified price.

Example:

  • For a long position, set the trigger price at $30,000 and the order price at $29,900 to increase the likelihood of execution.

Market Take Profit Stop Loss

Parameters:

  • Trigger Price
  • Order Quantity

Function:

  • When the trigger price is reached, a market order is placed at the best available price to quickly close the position.

Benefits:

  • The order is executed immediately after triggering.

Disadvantages:

  • The closing price is not guaranteed, and large positions or markets with poor liquidity may result in significant slippage.

Example:

  • Set the trigger price at $54,000 for a market order to quickly close a large position.

Use Scenarios

  1. Chasing Up:
  2. Set a trigger price above the current level to buy when the price rises above the trigger level.
  3. Close Down:
  4. Set a trigger price below the current level to sell when the price falls below the trigger level.
  5. Take Profit:
  6. Set the trigger price at the take profit level to close the position when the price reaches this level.
  7. Stop Loss:
  8. Set the trigger price at the stop loss level to close the position when the price reaches this level.

Summary

Choosing the Right Order Type:

  • Use Limit Price for Take Profit to guarantee a profit.
  • Use Market Price for Stop Loss to ensure a quick trade.
  • For small positions, use Market Price.
  • For large positions, use Limit or Market Price in batches.
  • In markets with irregular liquidity, select Limit Price.

Execution Logic

Parameters:

  • Position
  • Trigger Price
  • Order Price/Market Price
  • Order Quantity

Lifecycle of a Take Profit Stop Loss Order:

  1. Pending Trigger:
  2. After submission, the order waits for the trigger condition to be met.
  3. Appears in the [Schedule Order List].
  4. Each order has an expiration date (default 14 days) which can be adjusted in settings. If not triggered within this period, it will be canceled.
  5. Trigger Rules:
  6. Orders are triggered when the market's latest trade price meets specific criteria.
  7. An anti-pin mechanism is used to prevent unnecessary triggers due to abrupt price changes.

Example Scenarios

Limit Take Profit Scenario

  • On March 11, 2024, BTC breaks through $70,000.
  • Opened 10 BTC positions at $70,000, targeting $80,000.
  • Set take profit orders at $78,000 and $80,000 with the following parameters:

Take Profit Order 1:

  • Trigger Price: $78,000
  • Order Price: $77,900
  • Order Quantity: 5 BTC

Take Profit Order 2:

  • Trigger Price: $80,000
  • Order Price: $80,000
  • Order Quantity: 5 BTC
  • BTC reached $80,000 on March 11, but fell below quickly.
  • Only Take Profit Order 1 was executed, as the market price fell below $60,000 before Order 2 could be executed.
  • To increase execution probability, set the order price slightly below the trigger price.

Market Stop Loss Scenario

  • On March 11, 2024, BTC breaks through $70,000.
  • Opened 1,000 BTC positions at $70,000, targeting $100,000.
  • Set a market stop order at $64,000 with the following parameters:

Stop Loss Order:

  • Trigger Price: $64,000
  • Order Quantity: 1,000 BTC
  • BTC fell to $64,000 on March 11.
  • Position closed at an average price of $63,600, resulting in significant slippage.
  • For large positions, consider using batch stop loss or limit stop loss instead of a single market order.

By using these strategies and understanding the different order types, traders can better manage their positions and mitigate risks.

 

 

What is a Take Profit Stop Loss Order (Preset Take Profit Stop Loss)?

 

A Take Profit Stop Loss order allows you to set a Take Profit and Stop Loss at the same time when placing an open order. This ensures that the position has predefined levels for taking profit and stopping loss as soon as it is opened.

 

How is a Take Profit and Stop Loss Order Executed?

 

A Take Profit Stop Loss order is an OTO (One Trigger One) order, where the primary order triggers a secondary order.

 

Submitting a Take Profit Stop Loss Order

 

When placing an open order (limit order or market order), check the TP/SL option to include a Take Profit Stop Loss order. This consists of three parts:

  1. Main Order:
  2. Order price/market price
  3. Quantity
  4. Take Profit Order:
  5. Take Profit trigger price
  6. Take Profit order price/Market Price
  7. Stop Loss Order:
  8. Stop Loss trigger price
  9. Stop Loss order price/Market Price

Submission Rules for Take Profit/Stop Loss Trigger Prices:

  • For Long Positions:
  • Take Profit Order: Trigger price > Min (Main order limit, sell one price)
  • Stop Loss Order: Trigger price < Min (Main order limit, sell one price)
  • For Short Positions:
  • Take Profit Order: Trigger price < Max (Main order limit, buy one price)
  • Stop Loss Order: Trigger price > Max (Main order limit, buy one price)

Execution Phases

  1. Order Submission and Pending State:
  2. After submitting, the order appears in 'Current Order'.
  3. Initially, Take Profit Stop Loss will show 'not in effect' until the main order is filled.
  4. Main Order Confirmation:
  5. Once the main order is confirmed and a position is formed, the Take Profit Stop Loss order becomes 'effective' based on the set parameters.
  6. Triggering the Take Profit Stop Loss Order:
  7. When the main order is filled, the system submits the Take Profit Stop Loss order for the same quantity as the main order.

Frequently Asked Questions

 

Which orders can preset Take Profit Stop Loss?

  • Limit open position orders
  • Market price open orders
  • PostOnly open position orders
  • IOC open orders
  • FOK open orders

Will subsequent increases in positions also result in a TP/SL for the new positions?

  • No, the TP/SL is only set for the original order's quantity.

What happens if multiple TP/SL orders are set for a position?

  • Multiple TP/SL orders can coexist. The first one to trigger will execute without affecting the others.

What does 'not in effect' mean?

  • It means that the TP/SL order is waiting for the main order to be filled before becoming active.

Example

Limit Order with Take Profit Stop Loss

  • Main Order: Buy 1 BTC at $70,000.
  • Take Profit: Trigger price $72,000, Order price $71,900.
  • Stop Loss: Trigger price $69,000, Order price $69,100.

When the main order is executed and 1 BTC is bought at $70,000, the system will set a TP/SL order to sell 1 BTC with the specified Take Profit and Stop Loss parameters.

Market Order with Take Profit Stop Loss

  • Main Order: Buy 1 BTC at market price.
  • Take Profit: Trigger price $72,000, Market price.
  • Stop Loss: Trigger price $69,000, Market price.

When the market order is executed, the system sets the TP/SL order based on the actual trade quantity.

 

By understanding and using Take Profit Stop Loss orders, traders can automate risk management and profit-taking strategies effectively.

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