What is Contract Trading: How to Trade Crypto Derivatives on Pi42?

Contract trading in crypto represents a contract trading method where capital is leveraged, making it possible to deal with larger positions using small initial investments. Also known as margin trading, this form of trading has gained popularity because of its immense potential for getting high returns, but, in this same regard, it comes with high risks. Pi42 stands as a top-rated crypto derivatives exchange that puts traders ahead in the right tools and opportunities to put them into contract trading with multiple cryptocurrencies.

What is a Contract in Trading?

A trading contract is a legal kind of agreement where both parties state their agreement to either buy or sell an asset at some set price in the future. In a crypto derivatives context, these are contracts to trade crypto assets like bitcoins without necessarily owning them. Instead, what the traders own are called contracts to the correlation with the spot—i.e., the notional value of the underlying asset.

At Pi42, the trading of contracts gives a leverage experience to the trader, who can access the capital of the exchange with a higher margin compared to the amount first invested, therefore increasing the possibility of their profit. Traders can determine the size of the margin or leverage, from 2x to 100x, maximizing gains or losses. Pi42, therefore, becomes an interesting, flexible platform for all traders—novice and experienced alike.

Another exciting feature of a trading contract is leverage. Leverage refers to capital borrowed from the exchange, which is used to increase the trader’s position. For instance, in such a case, a trader with $1,000 can trade a position worth $10,000, using 10x leverage. However, while it does amplify profits, leverage can also do the same with losses; therefore, the trader needs to manage risk.

What is Bitcoin Contract Trading?

BTC contract trading simply relies on contracts based on the value borrowed from Bitcoin. It should be observed that in contrast to the spot trade, in which stakes in the actual ownership of Bitcoin are placed, it is different in the case of these contracts, which float according to Bitcoin’s move against spot valuation. This is very useful, especially for those who are looking forward to gaining from the volatile price of Bitcoin without actually having an asset in hand.

For example, one trader on Pi42 has to invest 1 BTC; say, for this current deal, the price is $24,000, but then they only have $400 in their account. At 100x leverage, they would be trading with 1 BTC of capital. What this means is they are borrowing the difference of $23,600—more than 60 times their capital. This increases their profit potential, but also their risks and the potential losses if liquidation occurs.

This is one characteristic that makes Bitcoin contract trading extremely optional on Pi42. First, it allows traders to go long or short. When one goes long, they simply anticipate that the price of Bitcoin will rise, whereas short means that one anticipates a downtrend in the price. This kind of flexibility enables traders to profit from both bull and bear markets.

Second, Bitcoin contract trading opens up an opportunity for hedging. For doing modifications with protection from unhealthy price movements, they can utilize the contracts to hedge their spot positions. For instance, a trader with Bitcoins in a spot account and expecting the price to drop can go short in his account through a contract for hedging purposes.

Market Size of Crypto Derivatives

The market of crypto derivatives is ballooning, as it records trading volumes of over $100 billion per day on all presently available crypto trading platforms. Pi42 has a massive contribution to this arena, taking it to the first rankings of crypto derivatives exchanges globally. Very importantly, the Bitcoin derivatives market holds more than 50% of the total crypto derivatives market—a fact underlining its dominance and the interest it brings about among traders.

According to 2021 data, the turnover ratio for crypto derivatives surpassed spot trading, which, became a reality for the first time in the history of these types of trading. The global derivatives market for equities, forex, and precious metals surpasses $1 quadrillion, which causes space for the further expansion of the crypto derivatives market to be really huge.

The latter provides various advantages over spot trading. The most important thing is that they offer higher leverage, which means that a trader can use too much lower capital to initiate control over a large-sized position. It, in turn, brings the potential for higher success but higher risks. Different derivatives allow speculation on cryptocurrency movements without actually holding these cryptocurrencies. It surely is very helpful for those trading cryptocurrencies short term.

What Are Contract Trading Benefits?

Numerous benefits make contract trading on Pi42 an interesting trading activity for investors:

More leverage: Your trade transaction is of much more money than you technically own when leveraging. In Pi42, this can go up to 100 times; the traders will end up making outsized profits amounting to the level of their initial investment.

Manageable Risk: This is because, by placing your stop losses beneath your liquidation price, you can at all times manage risk. This way, the most one can lose is collateral, and potential losses consequently stand minimized.

Safer: Because the trader does not have the real asset Bitcoin or another crypto within its accounts, there are no safety concerns regarding the holding of the assets. Pi42 provides great security to the funds of its users, making it one of the most secure in the world.

Swift Trade: It is Pi42 advanced trading technology that executes trades in real-time with the least downtime to reduce the risk of liquidation because of exchange maintenance.

A Wide Range of Trading Options: At Pi42, we are providing futures contracts for over 39 different cryptocurrencies. We plan to increase further to provide wide options for a trader to better diversify his portfolio.

Means of hedging: One can apply contract trading to hedge the spot position to curb the adverse movement of prices. This is more helpful when the market is highly volatile and therefore prices are less predictable.

Offer access to advanced trading tools: Pi42 has got some sophisticated trading tools and features to manage a user account for limit and market orders with take-profit and stop-loss options with live market data. Using such tools, a trader can play right with the decisions taken and also manage his positions.

How to Trade Contracts on Pi42?

Trading contracts on Pi42 is very easy, and it involves the following five steps:

Step 1 – Deposit Crypto

You need to deposit cryptocurrency in your account to start trading on the platform. It lets new users register and deposit various cryptocurrencies such as Bitcoin, Ethereum, Solana, and Cardano. If you have absolutely no crypto, you can buy or sell directly on the Pi42 platform with a credit/debit card or a bank transfer.

Pi42 gives a relatively smoothened deposit processing system that can have your funds ready for trading in just a few minutes. 

Step 2 – Convert spot > contract

Once your crypto assets have been credited into your spot trading account, you will then convert them into your contract trading account. This will be necessary so that you can use these assets as collateral when doing leveraged trades. Click on the “Assets” tab and then choose “Contracts Trading Account” to make the transfer. 

Conversion is made very user-friendly and intuitive on Pi42. On Pi42, the process is enriched with numerous pointers and instructions on your screen. 

Step 3: Picking Futures

Pi42 offers trading of a broad array of futures contracts. You will have an opportunity to choose among 39 different kinds of listed cryptocurrencies. You will only need to go to the contract markets section, select the contract that you want, hit the same, and then proceed straight to the trading page. Futures contracts at organizations like Pi42 span a wider range of offerings, which helps traders diversify their portfolios and find numerous trading opportunities. 

Step 4: Create a New Position

On the trading page, there will be this trading setting panel where you can personalize your trade settings. This means that you can set the leverage you want to trade with, choose how many contracts, and place market or limit orders. Let’s say you want to go long on Bitcoin at potentially 3x leverage. You type in your needed parameters and close your deal. Additionally, you can easily preset the levels of taking profit and stopping the loss in order to be able to manage your risks.

Step 5 – Begin to Trade

As soon as the trade is confirmed, your position is immediately opened, and you will be in active trade. Pi42 real-time monitoring, advanced charting tools, and analytics tools will make it very easy to keep track of your position and market movements. You may close your position manually or set it to close automatically once it reaches certain profit or loss levels.

Active trading on Pi42 always offers round-the-clock customer support to assist you with any queries and technical issues that might arise. This is very beneficial to beginners and also to experienced traders to quickly sort out any hiccups and therefore continue smoothly on their trading journey.

Conclusion

In contract trading in crypto, Pi42 excels as a leading crypto derivatives exchange. It provides an ideal trading environment with its advanced tools, user-friendly interface, and extensive options for crypto derivatives trading. Whether you are a beginner or an experienced trader, Pi42 stands out as the best crypto derivatives exchange for exploring the lucrative world of contract trading.