Differences Between Spot Trading and Futures Trading
- Conceptual Differences:
Spot Trading:
In the Spot market, you buy and sell crypto currency with instant delivery, and you own the assets immediately after the order is filled.
Futures Trading:
In the Futures market, a position opened is a Futures contract representing the value of a specific cryptocurrency. When it is opened, you do not own the underlying cryptocurrency, but a contract that you agree to buy or sell a specific cryptocurrency at some point in the future.
For example: If you buy BTC with USDT in the spot market, the BTC you buy will be displayed in the asset list in your account, which means that you already own and hold the BTC;
In the contract market, if you open a long BTC position with USDT, the BTC you buy will not be displayed in your Futures account, and it only displays the position which means you have the right to sell the BTC in the future to get profit or loss.
- Leverage
Leverage makes contract trading extremely capital efficient. When doing contract trading, you only need to invest a small part of 1BTC to open a contract position of a whole 1BTC. In contrast, spot trading does not offer leverage. For example, the current market price of 1BTC=30000USDT, if you want to buy 1 BTC in the spot market, you need to spend 30000USDT, but in the contract market, if you open 100 times leverage, you only need to invest 300USDT to get a 1BTC long position.
- Flexibility to Choose Long or Short
If you hold USDT in the spot, all you can do is to buy currencies. When the market is falling, buying is not profitable;
However, in the contract, if you hold USDT, you can choose to go long and short according to the market conditions. When the market is falling, you can choose to go short to make a profit. When the market is rising, you can choose to go long and make a profit.
Differences Between Traditional Contracts and Perpetual Contracts
- Traditional Contract:
A traditional contract, also a futures contract, is an agreement to buy or sell a commodity, currency or other financial asset at a predetermined price at a specific time in the future. Trades in the contract market are not immediately settled. In addition, users cannot directly buy and sell physical commodities or digital assets in the contract market. Instead, they trade contracts representing those assets, and the actual transaction of the asset (or cash) will take place in the future, when the contract is executed.
- Perpetual Contract:
A perpetual contract is a special type of futures contract. Unlike traditional contracts, perpetual contracts have no expiry date, and users can choose to keep their positions on the condition that there is forced liquidation caused by loss or manual liquidation.
Roles of Contract Trading
- Hedging and Risk Management: this is the main reason for the birth of futures contracts. In order to lock the income and cost and hedge the risk of sharp fluctuations in spot prices, companies or individuals engaged in commodity trading will place short orders (long orders) of the same position in the futures market to protect against risks;
- Short-term exposure: traders can bet on the performance of an asset even if they do not own it;
- Leverage: traders can open positions larger than their account balance.
How to Open a Futures Account
Before opening a Futures account, you need to sign up and create a regular CoinW account. If you have not registered a regular account, please go to the CoinW official website or the app personal center page and click "Register/Signup", then follow these steps:
- Enter your email address or mobile number and create a secure password. If you already have an invite code, paste it in the "Invitation Code" box.
- Click "Send Verification Code", you will soon receive a verification email or SMS, enter the verification code displayed into the input box
- When everything is ready, check "Read and agree to the "Coinw User Agreement" and click “Register/Signup”
- Next, log in to the CoinW account, go to the Futures page on the web at the navigation bar on the top of the homepage, and on the App, it is displayed at the bottom navigation bar.
- After entering the Futures trading page on the web, you can choose whether you need Futures novice guidance as needed; choose “I’m a newbie”, you will get to learn the lesson of basic contract operations according to the system prompts, choose the other one, you will directly enter the account opening interface. This step is not currently available on the App
- Click to check the risk commitment notice, click "Confirm" to activate the Futures account. When you have the account, you can trade!
(WEB)
(APP)
How to Deposit to Futures Account
You can flexibly transfer funds between the Asset account and Futures account. If you have not deposited any funds into CoinW, we recommend you to read 【About deposit and withdrawal procedures】
- On the web, if you need to transfer funds to your personal Futures account, there are two ways:
a.Click Assets--Futures account--Transfer
b.Go to the Futures trading page - click the "⇌" button next to the Available Margin
- On the app, if you need to transfer funds to your personal Futures account, there arealso two ways:
a.Assets--Futures account--Transfer
b.Go to the Futures trading page - click the "⇌" button next to the Available Margin
- Set transfer direction from Asset account to Futures account, input the amount you want to transfer, and then click "transfer now". The corresponding amount will be transferred to the Futures account shortly. The transfer direction can be reversed via the double arrow icon shown below.
CoinW Futures Interface Guide
- Trading pair data area
Click “Perpetual” at the left corner on the Futures trading page, and you can select the trading pair according to your personal needs (default is BTCUSDT)
You can view the transaction data of the current trading pair, as well as the real-time funding and the countdown.
- Order book, depth data area
View the K-line chart of the current trading pair, you can select the time unit as needed, and add indicator items
View current order book
- Order area
This is a ares for placing orders and supports the following operations:
Use different order modes to open positions and place orders (market/limit/trigger)
Take profit and stop loss settings
Assets transfer
Contract calculator
Search and use of Futures Bonus
Preference, position mode, leverage settings
- Position and order details area
Here you can monitor personal trading activities and conduct operations such as closing
Positions: List of currently held positions, you can view the size, the opening price, the margin occupied, the expected liquidation price, the unrealized profit and loss, the rate of return, etc.; and you can conduct operations such as setting take profit and stop loss, and the limit/market partially closing, the market fully closing for the position
Open orders: record of limit orders waiting to be filled
Limit orders: record of pending/un-triggered orders
Order history: record of closed positions in the past (displayed by selecting position mode or order mode)
Statement: You can check the fund flow records of the Futures account, including transfer, transaction fee, capital fee, realized profit and loss, etc.
(There is no corresponding page in the App, but you can check the transaction fee and realized profit and loss in the Order History)
- Margin list and contract information area
You can view the current situation of Futures account, margin usage, total profit and loss, and contract assets here. In the contract information section, you can view the basic data information of the current trading pairs.
How to Adjust Leverage
CoinW Futures trading allows manual adjustment of leverage for each contract.
To adjust the leverage, go to the order and click on the current leverage, and set a new leverage by adjusting the slider or entering a number, then click "OK".
Please note that higher leverage brings higher liquidation risk. So novice traders should carefully think before placing an order.
Order Type and How to Use It
There are several order types that can be used in CoinW contracts:
Market Order
A market order is an order that trades at the current best price. It is executed against the previously placed limit order in the order book. When placing a market order, you will be charged a taker fee of it.
Limit Order
A limit order is an order placed in the order book at a specific limit price. After placing a limit order, when the market price reaches the set limit price, the order will be matched to trade. Therefore, a limit order can be used to buy at a lower price, or to sell at a higher price than the current market price.
Please note: When the limit order is placed, the system does not accept buying at high prices and selling at low prices. If you buy at high prices and sell at low prices, the transaction will be executed immediately at the market price, and the handling fee will also be calculated at 0.06%.
Trigger Order
The trigger order sets a trigger price, and when the latest price reaches the trigger price set before, the order will be triggered to enter the order book. Now it supports market trigger order and limit trigger order
Take Profit and Stop Loss
Take profit and stop loss settings, you can preset the take profit price and stop loss price of a position before opening the position
How to Use Contract Calculator
One the web, click the calculator button in the order area, as shown in the red box:
On the app, go to the Futures page, tap the "..." button in the upper right corner, and tap the calculator. The specific operation is as follows:
Contract calculator helps users to perform relevant numerical calculations before going long or short. Currently, the calculator supports pre-calculation of profit, closing price, and liquidation price.
Note: Affected by position settings, price fluctuations and order book change, the number obtained by the calculator may have a certain deviation from that of the actual opened position. The calculator results are only for reference.
What Is Funding and How to Check It
Funding ensure that the price of the perpetual contract is as close as possible to the (spot) price of the underlying asset. In essence, traders "pay each other" based on their positions, and the difference between the perpetual contract price and the spot price will determine which party gets profits.
When the funding is positive, long party pays to short party, when negative, short party pays to long party.
To learn more about how it works, read Funding Rate.
This means that depending on the funding rate and your open positions, you end up either on the side paying or on the side receiving funding. On the CoinW Futures trading platform, funds are paid every 8 hours. On the web, you can view it at the top of the K-line chart on the Futures trading page, and on the app, you can view it at the bottom of the order book on the Futures page. The funding displayed are real-time, and the web supports viewing the remaining time of the next funding cycle (Countdown).
How to view real-time funding is shown in the figure below
（WEB）
（APP）
Differences Between Isolated and Cross
Cross: The balance of the Futures account is all used as margin. When a position is liquidated, it will affect the whole balance of the account.
Isolated: The margin allocated to a position is limited to a certain amount. When the position is liquidated, only the margin allocated to the position will be affected, and the remaining will not be affected.
Note: The cross/isolated mode switch can only be available when there is no unfulfilled orders or open positions; if there is, please close and cancel it before switching the cross/isolated mode.
Split/Merge
Merge: After placing an additional order, it will merge to the position of the same trading pair and the same direction and be displayed together. The opening price is the average opening price, and the margin and estimated liquidation price will change accordingly.
Split: After placing an additional order, it will split from the position of the same trading pair and the same direction and be displayed independently. Each has its own opening price, margin and estimated liquidation price
Note: The split/merge mode switch can only be available when there is no unfulfilled orders or open positions; if there is, please close and cancel it before switching the cross/isolated mode.
How to switch split/merge is shown in the figure below.
For specific operations, please see
【Instructions for Futures Contract Merging and Splitting (APP)】
【Instructions for Futures Contract Merging and Splitting (WEB)】
When Will the Position Be Liquidated Forcibly?
When the margin allocated is insufficient to maintain the existing position, the position will be liquidated forcibly. Margin balances include unrealized profits and losses. That is, the change of your profit or loss will cause the change of margin balance. If the position is in cross mode, the unrealized profit will be added to the contract balance as the margin for all positions; if in the isolated mode, the balance can be allocated to each position.
You can check the risk rate of the current position and the estimated liquidation price in the position. Please add enough margin in time before the forced liquidation is triggered.
Summary
A futures contract is a derivative that gives a trader a right to buy or sell an asset in the future. However, unlike traditional futures contracts, perpetual contracts have no delivery date.
Derivatives are a bit difficult to understand for newbie traders. Therefore, it is necessary to understand how these contracts work before taking financial risks. As mentioned above, it is suggested that you can try it with a small amount of money in the early stage, so as to avoid the risk of losing a big amount of money.
You can also refer to [Perpetual Contract FAQs] for an overview of the contract basic knowledge.