Dear Dcoin user:
Perpetual contracts are a financial derivative product launched by Dcoin. To help you deepen your understanding, we will introduce the characteristics of perpetual contracts, the main differences between perpetual contracts and spot transactions and traditional contract transactions through this article.
[What is a perpetual contract]
Perpetual contract is a financial derivative. It has the following two characteristics:
1. The perpetual contract has no expiry delivery date.
2. The perpetual contract makes the transaction price of the perpetual contract close to the corresponding spot price through the fund rate mechanism.
[Types of perpetual contracts]
The Dcoin digital currency trading platform provides forward perpetual contract trading with a leverage of up to 100 times, and more perpetual contract trading targets and derivative hedging tools will be launched one after another. Currently, the platform only accepts USDT as the margin for all contract transactions, and all products are priced in USDT.
[The difference between spot transaction and contract transaction]
1. The contract is different from the spot market. The two counterparties of the transaction will not settle immediately, but settle on a clearly agreed future date.
Important note: Due to the different ways of calculating unrealized profit and loss in the contract market, traders do not directly buy and sell physical commodities in the contract market, but trade contracts that represent commodities and settle in the future.
2. There is a further difference between the perpetual contract market and the spot market, that is, the perpetual contract has no expiration date.
Important note: Due to the existence of holding costs, the contract price is different from the spot market price. Like many contract markets, the platform uses "funding rates" to ensure that the contract market prices tend to be "marked prices". Although this system will promote the long-term convergence of prices between the underlying spot and the contract, there may still be relatively large price differences between the contract and the spot price in the short term.
[Differences between perpetual contract and delivery contract transactions]
1. Perpetual contracts are similar to futures contracts. The main difference is that: perpetual contracts have no expiry date or settlement date.
2. In addition, perpetual contracts inherit the characteristics of delivery contracts, especially without the need to deliver actual commodities, and imitate the behavior of the spot market to reduce the gap between the contract price and the marked price. Compared with traditional contracts (which have a long-term/fixed price difference with spot prices), this is a big improvement.
[Features of Dcoin Perpetual Contract]
1. Always anchor the spot market price
One feature of Dcoin perpetual contracts is that the transaction price is always anchored to the spot market price without huge deviation. Funding costs are an important means to ensure this goal. Dcoin calculates the funding cost by weighing the trends of the long and short sides of the perpetual contract trading on the market every 24 hours, and then the long and short side pays the other to ensure that the trading price of the perpetual contract is always anchored to the spot price . Funding fees are generated every 24 hours and are collected at 8 o'clock every morning.
2. Flexible leverage up to 100x
The spot leveraged trading market generally provides 3-5 times leverage, and the cost of borrowing is also higher. In the futures market, several major trading platforms only provide 5-20 times leverage. However, Dcoin perpetual contracts provide up to 100 times leverage. Traders can flexibly adjust after opening a position according to their trading needs. The platform provides a flexible gradient margin system while ensuring the best trading experience for traders.
3. Automatic lightening mechanism to ensure the interests of traders
Dcoin adopts a complete liquidation mechanism to ensure the interests of traders. This mechanism is used to determine who will bear the losses caused by the forced liquidation of the position when the position cannot be traded at a price better than the bankruptcy price. Different from the socialized loss sharing mechanism, all profitable traders share the loss. Dcoin adopts an automatic lightening mechanism to ensure that the interests of traders are not affected by huge losses caused by a small number of high-risk speculators. The automatic lightening system sorts according to the profit percentage and effective leverage of customer positions. That is, traders with high profits and high leverage will be selected first.
5. Multi position mode
Each order of opening position will not be merged. After the successful matching of opening, an independent position will be formed, which can clearly calculate the profit and loss of each order. The maximum number of positions and orders is ten.
【Market Mechanism of Perpetual Contract】
Leverage multiples: Dcoin provides different leverage levels for different products, the highest leverage can reach 100 times. Leverage is determined by the initial margin and maintenance margin level. They determine the minimum capital required for traders to open and maintain positions. Leverage is not a fixed multiple, but a minimum margin requirement. You can view the minimum amount of initial margin and maintenance margin on the risk limit document page.
Opening value: Average opening price * number of contracts * single contract value
Position value: number of contracts * value of single contract * mark price
Unrealized profit and loss: The trader's current contract position generates profit and loss, also known as floating profit and loss.
Realized profit and loss: the accumulated profit and loss of the trader's closed positions before the contract is settled.
Profit: The realized income that has been settled since the position was opened + the unrealized income since the last settlement.
Profit rate: = income / margin required when opening a position = income / (contract face value * number of contracts * opening average price / leverage).