COIN-margined contracts are a type of derivatives trading product that offers traders the opportunity to trade with digital assets as collateral. These contracts offer traders a unique set of characteristics, such as leverage and low initial capital requirements, allowing them to capitalize on market volatility without having to put up large amounts of capital. Let’s take a closer look at what makes COIN-margined contracts so attractive to traders.
Contents of this article:
What are COIN-margined futures?
Coin-margined futures contracts are a relatively new financial instrument that allow users to speculate on price movements while maintaining the same coin they initially invested with. This type of contract, which is offered by some crypto exchanges, such as XT.COM, allows users to hedge their coin positions without taking physical delivery of any tokens or coins. Coin-margined futures also provide margin currently unavailable with spot trading and give investors greater ability to short digital coin prices with less capital requirement than spot trading. With coin-margined futures, traders can access markets, stay leveraged and enjoy significant gains in volatile markets even if the asset falls in price.
Cross Margin Mode and Isolated Margin Mode: Cross margin mode and isolated margin mode are two separate ways coin margined futures contracts can be traded in the derivatives market. The main difference between the two is that cross margin mode requires only one unified margin instead of a position-by-position basis, while isolated margin mode has individualized margin amounts that must be managed separately. By using cross margin mode, traders are able to access more leverage than isolated margin as they can use their entire account balance to open positions. Cross margin also reduces the risk of collateral harm from happenings such as unexpected market movements or transaction errors. However, it is important to note that there is more inherent risk involved in cross margining due to its use of overall account margins.
Limit Order, Market Order, and Trigger Order: A Limit Order is a coin margined futures contact that enables traders to control their coin entry and exit prices. This type of order offers the greatest level of security, allowing traders to set a maximum value they are willing to pay or sell for. If coin prices rise too much, the limit order will not be executed and therefore, traders can avoid paying too high of a price. A Market Order, on the other hand, is an instruction to buy or sell coin at the current market price. As it does not guarantee coin price, trading with Market orders is more risky since coin prices can quickly become volatile if news is released about them unexpectedly. Trigger Orders offer more security than Market Orders. They work by activating in response to coin prices hitting pre-determined levels which ensures that the trade will be successful only when the coin’s trend follows the trader’s predictions.
Fund Fee: Trading in coin margined futures comes with fund fees that can be a daunting additional charge for traders. Fund fees refer to the fund’s administrative cost and don’t necessarily reflect the profitability of an individual investor. While these fund fees are difficult to avoid, investors should research which fund offerings provide the lowest fund fee rate to ensure they’re getting their money’s worth from the trading experience. Such research can save investors from unnecessary costs associated with coin margined futures trading, further diversifying their potential investments in the futures market.
What characteristics do COIN-margined contracts offer?
COIN-margined contracts offer traders the ability to use digital assets as collateral for their trades. This means that traders can effectively use the value of their digital assets (e.g., Bitcoin, Ethereum) as leverage when trading these products. Furthermore, because these products are margined using digital assets, there is no need for initial capital requirements which can be quite high in other markets (e.g., stock markets). This makes it easier for traders to enter into positions with lower risk and capital outlay than if they were trading traditional markets.
In addition, these contracts offer multi-level margin and liquidation systems which provide additional security against potential losses due to price volatility in the underlying asset. They also offer multiple order types including limit orders and market orders which enable users to quickly enter and exit positions based on their desired risk profile. Finally, there is also an integrated stop loss system which ensures that users do not suffer large losses due to extreme price movements in the underlying asset.
What are the pros and cons of COIN-margined futures?
Pros of COIN-margined futures
Trade Profitably in All Market Conditions - COIN-margined futures are an increasingly popular way to trade in all market conditions due to their low cost and ease of access. With COIN-margined futures, traders have the ability to capitalize on both rising and falling markets and take advantage of short-term price movements or long-term trends with little capital outlay. In addition, traders can benefit from the ability to quickly open and close positions with minimal fees or commissions. This allows them to take advantage of opportunities regardless of market conditions and can provide a steady stream of profits over time.
Hedge Price Risk - One of the primary advantages of trading COIN-margined futures is that they provide investors with a way to hedge their price risk. By buying and selling contracts at different prices, traders can effectively protect themselves against losses resulting from volatile markets or other external factors such as political instability or natural disasters. Additionally, these types of contracts allow for greater flexibility in terms of when the hedging strategy is implemented, allowing investors to react quickly to changes in market conditions.
Amplify Trading Gains with Leverage - An additional benefit offered by COIN-margined futures is that they allow traders to amplify their trading gains through the use of leverage. Leverage refers to taking on more risk than would normally be possible with a stock position but allows traders to potentially make larger profits due to higher levels of return achievable on smaller amounts invested. This is particularly appealing for those who are looking for higher returns but are unable or unwilling to commit large sums of capital upfront. It also allows for diversification which reduces overall exposure as well as providing added protection against sudden downturns in price levels. Leveraged trading using COIN-margined futures gives traders the opportunity not only increase their potential profits but also minimize their risk profile by limiting their downside losses.
Cons of COIN-margined futures
On the downside, since these products are margined using digital assets rather than fiat currency, this means that any profits or losses will be denominated in digital currency - which may have its own inherent volatility risks associated with it (depending on your local jurisdiction). In addition, since many exchanges offering these products require KYC/AML verification before being able to start trading them - this could potentially add another layer of complexity and cost if you do not already have an account setup with a compatible exchange prior to opening a position in one of these futures products.
What are the differences between USDT-margined and Coin-margined Futures?
USDT-margined futures and Coin-margined Futures both offer exciting opportunities for traders, but there are some key differences between the two that should be taken into account before trading. Firstly, USDT-margined futures are denominated in the stablecoin Tether (USDT) which means potential losses or gains from positions taken will be settled in USDT. On the other hand, Coin-margined futures use cryptocurrency assets as the underlying collateral which provides an additional layer of risk because it opens traders up to volatility from both currencies involved in the trade. Further, Coin-margined futures allow more options when setting up a margin requirement as you can use either USDT or your preferred cryptocurrency as collateral.
When it is judged that the general trend of the market operation is a bull market, for trend trading users, choosing to do long coin-margined contracts can expand profits; when it is judged that the general trend of market operation is a bear market, for trend trading users, choosing to short USDT-margin contracts can expand profits. When the short-term market is rising, choose to long the coin-margined contract; when the short-term market is falling, choose to short the USDT-margin contract. For coin-margined contracts, the typical user group is hedging users, such as miners, whose characteristics are that they need to hold a certain coin for a long time; for USDT margin contracts, the typical user group is fiat currency-based users, which meet the low transaction costs and simple calculation requirements. All told, each type of margined future has its own considerations before entering a trade and it’s important to be aware of the differences between each option to help make informed decisions when trading.
What are COIN-margined perpetual contracts?
Perpetual Coin-Margined Futures is a kind of derivative with no expiration or settlement date. COIN margined perpetual contracts are a type of cryptocurrency derivative that merges the advantages of futures and options. They allow traders to invest with low capital requirements without expiring and also be charged on a round-turn basis (including entry and closing fees). COIN margined perpetual contracts provide simple pricing algorithms based on a composition of prices from selected exchanges allowing competitive commissions when compared to traditional margin products alongside increased leverage. This allows traders to gain significant market exposure while having total control over their portfolios. COIN margined perpetual contracts could be an attractive option for anyone looking to add cryptocurrencies like Bitcoin and Ethereum to their portfolio.
How to trade COIN-margined perpetual futures on XT Futures?
On the futures trading page, you can unlock a world of market intelligence and be in control. Use the real-time price chart to track your selected pair. See orders or review active positions at the bottom display - then consult any other brokerages making buys/sells in their order book, and view recently completed trades for further knowledge on what’s happening with market values. Finally, you can place trading orders on the right of the screen.
The coin-margined perpetual contract is a perpetual contract denominated in a certain kind of digital asset (such as BTC or ETH). XT.COM currently offers BTC/USD perpetual, ETH/USD perpetual, and many other perpetual contracts trading pairs. Here, we will use BTC USD perpetual trading as an example.
If you don’t have enough funds in your Futures account, you can easily transfer assets from Spot to Futures account with just one click. If you don’t have funds on the Spot side either, you can buy crypto directly with fiat currency
When your futures account has the required funds, you may place your limit order by setting price and the number of contracts you would like to purchase. You may then click “Open Long” or “Open Short” to complete your order.
XT allows up to 125X leverage on its trading pairs, and your maximum allowable leverage depends on the initial margin and maintenance margins. Traders may adjust their long or short positions using cross-margin mode or isolated-margin mode. For example, if a trader wants to reduce risk by decreasing leveraged hedging from 100X to 20X in an isolated position, they can click “Isolated 100X” then adjusting the figure down below that before hitting “Confirm”. Then the leverage of the position has now been reduced to 20X.
XT Futures supports two different margin modes to accommodate differing trading strategies. They are Cross Margin mode and Isolated Margin mode. By default, all traders start in cross margin mode.
Trading smartly with XT Futures means understanding when to go long or short on your positions. Going “long” is the act of buying a contract in anticipation that its price will rise, allowing you to sell it for profit later down the line. Alternatively, going “short” requires predicting future market dips; by selling at current prices and re-buying back later at lower ones - earning investors even greater profits! With an array of order types available from XT Futures designed specifically around efficient trading strategies - potential earnings are endless!
During the futures trading, if you need to perform some basic arithmetic, you can use the provided calculator function on the futures trading page.
About XT Futures
XT.COM derivative trading platform offers some of the best features available on the market. With USDT-margined perpetual and quarterly contracts, as well as coin-margined perpetual and quarterly contracts and prediction markets, you’ll be able to access easy, fast trades. Plus, with copy trading, futures grid trading and more advanced tools at your disposal, the possibilities are endless. Our platform strives to cater to our large user base by providing a secure, trusted and intuitive trading experience.