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May 13, 2024
Product
Leveraged Trading On Orderly Network
by Orderly Network
Leveraged Trading On Orderly Network

Leveraged trading is a strategy in which traders enhance their positions to increase potential gains beyond what would be possible with the trader's own capital alone. When market conditions align with your trades, they can significantly enhance investment returns. However, adverse market movements can also exacerbate potential losses. The double-edged sword that leverage presents means that traders must be conversant with the nub of advanced trading to be profitable.

Orderly offers traders the tools and interface to seamlessly trade perp futures up to 20x leverage. Let’s take a look at everything you need to know when leverage trading on Orderly;

Some key concepts to understanding leveraged trading include;

  • Leverage: When trading, traders use leverage (1x, 2x, 10x, etc.) to enhance their positions. For instance, with a 10x leverage provided by your broker, every dollar you invest grants you the purchasing capacity of $10, $1000 on a 20x leverage means you have $20,000 to trade and so on.
  • Spot trading (On the spot): Spot trading involves the actual buying or selling of the underlying crypto asset. Hence, if you hold an asset in the spot market, you can benefit only from its potential price appreciation.
  • Contract for Difference: Perp futures is a “contract for difference” where traders enter contracts based on the estimated future price of the underlying asset, with the spot price as the reference point.

See full glossary on perps trading here

… or you can simply ask our in-built AI for all things Orderly!

On Orderly, you can either trade spot or perps, however, leveraged trading is only available for the latter. All spot markets on Orderly are traded against USDC without any leverage, meaning every trade requires the exchange of USDC. In essence, spot trading on Orderly involves;

  • Actual asset transfer: The buyer and the seller trade real assets based on the prevailing market price.
  • Zero leverage: Traders use their wallet assets to execute a trade and cannot borrow additional funds through leverage.
  • Only available on NEAR

In traditional spot trading, traders can use leverage to increase their positions – a trading strategy known as spot margin trading. While both spot margin trading and perps futures trading are forms of leveraged trading, but they differ in several key aspects:

  • Underlying Asset: Spot margin trading involves direct buying or selling of assets like Bitcoin or Ethereum. Perpetual futures trading trades derivative contracts without owning the underlying asset.
  • Delivery Date: Spot margin trades settle immediately, while perpetual futures contracts have no expiry date and track spot market prices through funding mechanisms.
  • Leverage Mechanism: In spot margin trading, traders borrow funds for leverage, choosing their leverage level. In perpetual futures trading, leverage is inherent to the contract itself, adjusted by position size relative to margin balance.
  • Funding Rates: Perpetual futures contracts have funding rates, ensuring contract price alignment with the asset's price, unlike spot margin trading, which doesn't involve funding rates.
  • Risk Profile: Spot margin trading exposes traders to underlying asset price movements, while perpetual futures trading involves additional risks like funding rate fluctuations and liquidation risks.

Perpetual futures, however, represent a trading method that doesn't necessitate ownership of the underlying asset. Traders essentially engage in a contract to buy or sell an asset at a predetermined price. Unlike traditional futures, there's no fixed expiration date for these contracts. Similar to margin trading, perpetual futures traders need collateral deposits to leverage their positions. Profits or losses in this contract type are contingent on the trader's accuracy in predicting future prices, enabling profitability regardless of a bullish or bearish forecast. The key tenets of a perpetual futures contract include:

  • Leverage: Traders can magnify their position through leverage. For example, a perp trader with a $1000 account balance could use 10x leverage to take on a position of $10,000, increasing the likelihood of profit or loss by the same margin.
  • Contracts: Perp futures do not involve the actual trading of an underlying asset. Profit or loss is based on the prediction accuracy of a trader.
  • Liquidity: The perp futures market is usually more liquid than the spot market as trading is based on contracts rather than actual asset exchange.
  • Expiration: Perp futures do not have expiration dates.

Trading Perps on Orderly

Traders can enjoy seamless omnichain trading experiences on Orderly either through our API or one of the numerous front-end platforms, speculating derivatives financial contracts without expiry dates. You can increase your position size with up to 50x leverage across a wide range of assets, enjoying deeper liquidity on Orderly’s orderbook with minimal price impact. While it is mandatory to meet the account maintenance and liquidation requirements, traders must deposit collateral in USDC as all perp contracts are quoted and settled in USDC.

  • Cross-margin collateral: At present, Orderly only supports cross-margin collateral. This means all traders must deposit USDC collateral, which is then shared across all open positions to calculate their account margin ratio.

  • Leverage positions: Orderly allows traders to freely use the following leverages - 1x, 2x, 3x, 4x, 5x, 10x, 20x and up to 50x.

  • Position mode: At present, traders on Orderly can use one-sided positions. They cannot hold long and short positions on a single perp futures contract.

Orderly’s infrastructure creates an institutional grade, CEX-like perps trading experience enabling you to trade onchain seamlessly across major networks without any bridging risks involved.

Trade on Orderly today and enjoy seamless permissionless perps trading experience on Orderly!

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