Poloniex: Part 3: Futures Market

In the ongoing week of #poloniexspotlight, I have already published Poloniex Part 1 & Part 2, Today I will detail Part 3.

This Publication is an exclusive piece of Poloniex Futures Market.

Exchange(Spot) Market Vs Futures Market

In Exchange (Spot) market, the real settlement of the asset happens. Someone buys when the other sells it. But the seller can only sell the asset he owns. It is not possible to sell an asset you have not owned yet. So it's the real market.

In Futures Market, you predict the price of the asset(spot index) in a future time. There is also a due date or expiry date. So who so ever enters the contract of a Futures Market has to close the position on or before the expiry date or it will automatically get squared off. Also, you are offered certain leverage, that leverage can maximize your profit with fewer resources, equally involves risk if it moves in the opposite direction of your position. Further, you can buy or sell both, you don't even need to own an asset to sell it. It is primarily a contract. So you can buy and sell it for a profit( or loss), or you can sell it first and then buy it for a profit(or loss). So it's a kind of synthetic market.

Perpetual contracts are very much prevalent in the Crypto segment offered by most of the exchange platforms. Perpetual means it does not have any expiry. That is another advantage of the perpetual Futures contract.

Example,

Let's say the BTC price is 5000 USD. In Exchange(spot) market, you need 5000 USD to buy 1 BTC. If BTC goes up to 15000 USD, then you earn a profit of 10000 USD. If BTC trades lower to 4500 USD, then you lose 500 USD of its value, but that is not realized loss until you sell it for another asset.

In Futures market, if you have 500 USD, and the price of BTC is 5000 USD, then a 10X leverage can buy you 1 BTC(5000 USD) with just 500 USD. If BTC trades higher to 15000 USD, then you earn 10000 USD profit with just 500 USD, 10X leverage. However, if BTC trades lower to 4500 USD, then the position will be liquidated and your 500 USD is gone forever.

Difference between Exchange Market & Futures Market

Exchange(Spot) market

• In Exchange(Spot) market, you own a tangible asset, you can move that asset from one place(exchange) to the other(exchange, wallet, etc). You can cancel your order(if pending) and withdraw or transfer it to another place.
• It is still your asset regardless of its value, even if it becomes zero in value.
• You are not confined within any range.

Futures Market

• In contrast, in the Futures Market, it is merely a contract with certain leverage. You could earn a huge profit(effected with leverage in favorable market condition), you could lose your position completely and lose all your money(effected with leverage in unfavorable market condition).
• You can not move your contract from one place to the other. The only way is to close your position and exit with a profit/loss.
• You are confined within a range(from the entry price to the liquidated price)

Poloniex Futures

Poloniex offers USDT collateralized perpetual Futures contract with USDT as the margin requirement- BTCUSDTPERP, ETHUSDTPERP, BSVUSDTPERP, BCHUSDTPERP, YFIUSDTPERP, UNIUSDTPERP, LINKUSDTPERP.

The contract is quoted and denominated in USDT and the underlying price is the spot index. The spot index is the volume-weighted average USDT price of the respective assets in 6 exchanges including Poloniex, Binance, OKEX, Huobi, Hitbtc and KuCoin.

Fees- Maker/Taker fee: 0.026% maker / 0.075%(regardless of volume of trading)

Leverage- Up to 10X for Level 1 users and up to 100X for Level 2 users.

How do I trade Futures in Poloniex

Prerequisites:-

• Enable Futures Trading by clicking on Enable Futures Trading.(This you can do in the Futures section when you first visit this section, it will ask you to enable)
• Transfer your wallet Balance from Exchange to Futures. In other words, you must have USDT Balance to be able to trade in Futures.

Note- If you are a Level 1 user, then you can trade up to 10X leverage in Futures. If you are Level 2 verified user, you can trade up to 100X leverage in Futures.

How do I transfer my Balance from Exchange to Futures

Please note that in the Futures contract, you need USDT to trade USDT collateralized Futures contract. So you need to transfer USDT from your Exchange Balance to Futures Balance.

• Go to your Wallet.(Assuming you are already logged in to Poloniex)

• You can see the Total Balance as well as the Balances held in Exchange wallet, Futures wallet, Lending wallet, WINk wallet, etc. Click on Futures-- View Details.

• You can now see the Total Balance in Futures wallet which will also show you the Available Balance(free to use) and the Balance already used in a position/contract. Click on Transfer Balances.

• Now first select from and to. For example, From Exchange to Futures. Then enter the Amount(it has to be less than or equal to the available balance from the wallet you are sending).

• Then click on Transfer. Voila!

How do I trade(buy/sell) a Futures Contract.

As we discussed earlier you must have a USDT balance to trade the USDT collateralized perpetual contract.

Click on the "small inverted triangle" on the left to see the list of contracts and select the one you want to trade. For example, I will select ETH Perpetual to trade.

Now you can create three types of order-

• Limit-- You can set the limit (or specify the price) to buy or sell the contract.
• Market-- You can buy or sell the contract at the available price of the market.
• Stop-- You can create a buy-stop order or sell-stop order and that will trigger when the price reaches the specified price. These are generally used by the advanced/professional traders who use pivot, resistance, support level, and accordingly place their position.

Trading View

Let's create a Limit Order

• Select Order type-- Limit
• Input Price(USDT)-- For example, 430 in ETH Perpetual Contract.
• Input Amount-- For example, 0.02 ETH or 0.05 ETH in ETH Perpetual Contract
• Then select the leverage- 1X, 5X, 10X, 20X, 35X, 50X, 100X, etc. Please note that a Level 1 user can play with leverage up to 10X-- 1X or 5X or 10X.
• Then click on either Buy/Long or Sell/Short.

A pop-up will appear which will contain all the details of the order. Confirm it to execute the order. Here you will also get to know how much USDT will be used (Cost) to execute this order for the chosen price and the selected leverage.

• It will now show in the open orders, and once it gets filled, it will reflect in open positions.

Let's create a Market Order

• Select Order type-- Market
• Input Amount-- For example, 0.02 ETH or 0.05 ETH in ETH Perpetual Contract.
• Then select the leverage- 1X, 5X, 10X, 20X, 35X, 50X, 100X, etc. Please note that a Level 1 user can play with leverage up to 10X-- 1X or 5X or 10X.
• Then click on either Buy/Long or Sell/Short.

A pop-up will appear which will contain all the details of the order. Confirm it to execute the order. Here you will also get to know how much USDT will be used (Cost) to execute this order for the chosen price and the selected leverage.

• It will directly reflect in open positions being a Market Order.

Important Note
Please note that when you input the Price or Amount, it will instruct you on the upper, lower limit, the decimal places, etc. So accordingly enter a valid input.

Open Position(s)
When you buy/sell a contract at Market, it will immediately reflect in Open Positions. When you buy/sell a contract at Limit, it will queue up, once it gets filled, it will reflect in Open Positions.

At this place, you can see the complete detail of your position, with the most important ones being Setting TP/SL, Liquidated Price, Close position, Unrealized P&L, Auto-deposit margin, etc.

_{TP/SL- Take Profit/Stop Loss
P&L- Profit & Loss}

The indicated liquidated price is the level at which your position will automatically square off, to avoid this you can replenish the margin by enabling auto-deposit margin or by manually adding the margin amount.

To set TP/SL in your position, you need to click on the edit symbol, and then enter/edit the TP price(it will show you the estimated profit) and similarly the SL price(it will show you the estimated loss). Once the TP/SL is set, and the price reaches that level(TP or SL), your position will be automatically close(with either Profit or Loss).

You can also manually close your position either with Limit Order or Market Order.

Conclusion

The Futures market involves significant risk in proportion to the leverage selected. So a trader may gain substantially in the favorable market condition(equally involves risk to lose all the money). So if someone is not well experienced with professional trading, should not opt for Futures Trading.

Therefore the scope of this publication is limited to information & educational purpose only. If you don't understand the Futures Market or don't have skills of professional trading, it is always better to stick with the low-risk Exchange(Spot) market with a long term strategy.

Thank you.

Cc:-
@steemitblog
@steemcurator01
@steemcurator02

Unless otherwise stated, all the images, infographics, charts, tables, etc(if any) are my original works. Screenshots are taken from the Poloniex official exchange site.

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