How to do Futures Trading on DigiFinex

What are Perpetual Futures Contracts?

A futures contract is a legally binding agreement between two parties to buy or sell an asset at a predetermined price and date in the future. These assets can vary from commodities like gold or oil to financial instruments such as cryptocurrencies or stocks. This type of contract serves as a versatile tool for both hedging against potential losses and securing profits.

Perpetual futures contracts, a subtype of derivatives, enable traders to speculate on the future price of an underlying asset without actually owning it. Unlike regular futures contracts with set expiration dates, perpetual futures contracts do not expire. Traders can maintain their positions for as long as they desire, allowing them to capitalize on long-term market trends and potentially earn substantial profits. Additionally, perpetual futures contracts often feature unique elements like funding rates, which help align their price with the underlying asset.

One distinctive aspect of perpetual futures is the absence of settlement periods. Traders can keep a position open for as long as they have sufficient margin, without being bound by any contract expiry time. For instance, if you purchase a BTC/USDT perpetual contract at $30,000, there is no obligation to close the trade by a specific date. You have the flexibility to secure your profit or cut losses at your discretion. It’s worth noting that trading perpetual futures is not allowed in the U.S., although it constitutes a substantial portion of global cryptocurrency trading.

While perpetual futures contracts offer a valuable tool for gaining exposure to cryptocurrency markets, it’s essential to acknowledge the associated risks and exercise caution when engaging in such trading activities.

Explanation of Terminology on the Futures Trading Page on DigiFinex

For beginners, futures trading can be more complex than spot trading, as it involves a greater number of professional terms. To help new users understand and master futures trading effectively, this article aims to explain the meanings of these terms as they appear on the DigiFinex futures trading page.

We will introduce these terms in order of appearance, starting from left to right.

Terms above the K-line chart

Perpetual swap: "Perpetual" denotes continuity. The commonly seen "perpetual futures" (also known as perpetual futures contracts) evolved from traditional financial futures contracts, with the key difference being that perpetual futures have no settlement date. This means that as long as the position is not closed due to forced liquidation, it will remain open indefinitely.

Mark Price: The establishment of Mark Price helps to improve the stability of the contract market and reduce unnecessary liquidation due to abnormal market movements. Mark Price is for the profit and loss calculation. The calculation of the Mark Price is based on the index price. The weighted average price of the corresponding transactions of three or more exchanges is taken as the index price.

Spot Index: The real-time fair price of the futures, calculated based on the index price and market price. It is used to calculate the floating PNL of positions and determine position liquidation. It may deviate from the last price of the futures to avoid price manipulation.

Funding Rate / Settlement: The funding rate in the current stage. If the rate is positive, long position holders pay the funding fee to short position holders. If the rate is negative, short position holders pay the funding fee to long position holders.

Terms in the Bid/Ask area

Bid/Ask: A window to observe market trends during the trading process. In the Bid/Ask area, you can observe each trade, the proportion of buyers and sellers, and more.

Terms in the trading area

Open and Close: After entering the price and quantity based on your judgment of the market direction, you can choose to open a long or short position. If you predict an increase in price, you open a long position; if you predict a decrease, you open a short position. When you sell the contract you bought, you close the position. When you open a position by purchasing a contract and hold it without settling, it is called a holding position. You can view your holding positions by clicking on [Open Position] at the bottom of the page.

Open Long: When you predict that the token price will rise in the future and open a position based on this trend, it is known as opening a long position.

Open Short: When you predict that the token price will fall in the future and open a position based on this trend, it is known as opening a short position.

Margin and Margin Mode: Users can engage in futures trading after depositing a certain percentage of funds as financial collateral. This fund is known as margin. The margin mode is divided into isolated margin or cross margin.

Isolated: In isolated margin mode, a certain amount of margin is allocated to a position. If the margin for a position decreases to a level below the maintenance margin, the position will be liquidated. You can also choose to add or reduce margin to this position.

Cross: In cross margin mode, all positions share the cross margin of the asset. In the event of liquidation, the trader may lose all the margin and all positions under the cross margin of that asset.

Order Types: The order types are divided into limit order, market order, trigger order, trailing stop order, and post-only order.

Limit: A limit order is an order placed to buy or sell at a specific price or better. However, a limit order’s execution isn’t guaranteed.

Market: A market order is an order placed to buy or sell quickly at the best available price in the market.

Trigger: For trigger orders, users can set a trigger price, order price, and quantity in advance. When the market price reaches the trigger price, the system will automatically place an order at the order price. Before the trigger order is triggered successfully, the position or margin will not be frozen.

TP/SL: A TP/SL order is an order with preset trigger conditions (take profit price or stop-loss price). When the last price / fair price / index price reaches the preset trigger price, the system will close the position at the best market price, based on the preset trigger price and quantity. This is done to achieve the goal of taking profit or stopping losses, allowing users to automatically settle the desired profit or avoid unnecessary losses.

Stop Limit Order: A stop limit order is a preset order where users can set the stop-loss price, limit price, and buy/sell amount in advance. When the last price reaches the stop-loss price, the system will automatically place an order at the limit price.

COIN margined: Coin-margined futures provided by MEXC are a reverse contract that uses cryptocurrency as collateral, meaning that cryptocurrency serves as the base currency. For example, in the case of BTC coin-margined futures, Bitcoin is used as the initial margin and for PNL calculations.

USDT margined: USDT-margined futures provided by MEXC is a linear contract, which is a linear derivative product quoted and settled in USDT, a stablecoin pegged to the value of the US dollar.

How to Trade USDT Margined Perpetual Futures on DigiFinex (Website)

1. Go to the DigiFinex Website, click on [Derivatives], select [USDT margined].

2. On the left-hand side, select [BTCUSDT] as an example from the list of futures.

3. Click on Isolated or Cross to choose your [Margin Mode].

Click on [20X] to adjust the leverage multiplier by clicking on the number.


4. To initiate a fund transfer from the spot account to the futures account, click on [Tranfer] located on the bottom-right to access the transfer menu.

Once in the transfer menu, choose the Crptocurrency and enter the desired amount you wish to transfer, and click on [OK].

5. To open a position, users have four options: Limit Price, Market Price, Stop Limit and Market Limit. Follow these steps:

Limit Price:

• Set your preferred buying or selling price.

• The order will only execute when the market price reaches the specified level.

• If the market price doesn’t reach the set price, the limit order remains in the order book, awaiting execution.

Market Price:

• This option involves a transaction without specifying a buying or selling price.

• The system executes the transaction based on the latest market price when the order is placed.

• Users only need to input the desired order amount.

Stop Limit and Stop Market:

• Choose a Trigger Type and set a trigger price, order price, and order quantity.

• The order will only be placed as a limit order with the predetermined price and quantity when the latest market price hits the trigger price.

• This type of order provides users with more control over their trades and helps automate the process based on market conditions.

6. After placing your order, view it under [Open Orders] at the bottom of the page. You can cancel orders before they’re filled.

How to Trade USDT margined Perpetual Futures on DigiFinex (App)

1. Open your DigiFinex App, on the first page, tap on [Derivatives].

2. To switch between different trading pairs, tap on [BTCUSDT-Swap] located at the top left. You can then utilize the search bar for a specific pair or directly select from the listed options to find the desired futures for trading.


3. Choose the margin mode and adjust the leverage settings according to your preference.

4. To initiate a fund transfer from the spot account to the futures account, click on [Tranfer] to access the transfer menu.

5. To open a position, users have four options: Limit Price, Market Price, Stop Limit and Market Limit. Follow these steps:

Limit Price:

• Set your preferred buying or selling price.

• The order will only execute when the market price reaches the specified level.

• If the market price doesn’t reach the set price, the limit order remains in the order book, awaiting execution.

Market Price:

• This option involves a transaction without specifying a buying or selling price.

• The system executes the transaction based on the latest market price when the order is placed.

• Users only need to input the desired order amount.

Stop Limit and Stop Market:

• Choose a Trigger Type and set a trigger price, order price, and order quantity.

• The order will only be placed as a limit order with the predetermined price and quantity when the latest market price hits the trigger price.

• This type of order provides users with more control over their trades and helps automate the process based on market conditions.

6. After placing your order, view it under [Open Orders] by scroll down to the bottom of the page. You can cancel orders before they’re filled.

Frequently Asked Questions (FAQ)

Types of Order on DigiFinex Futures

Limit Order

Limit orders allow the trader to set a specific buying or selling price, and the order will be filled at the order price or at a price more favorable than the order price. 

When a limit order is submitted, if there is no order of which price is more favorable than or equal to the order price available for matching in the order book, the limit order will enter the order book to be filled, increasing the market depth. After the order is filled, the trader will be charged according to the more favorable maker fee.

When a limit order is submitted, if an order of which price is more favorable than or equal to the order price is already available for matching in the order book, the limit order will be immediately filled at the current best available price. Because of the liquidity consumed during the order execution, a certain trading fee will be charged as the Taker fee expense.

In addition, limit orders can also be used to partially or fully close a take profit limit order. The advantage of a limit order is that it is guaranteed to be filled at the specified price, but there also exists a risk that the order will not be filled.

When using a limit order, the user can also switch the effective time type of the order according to their trading needs, and the default is GTC:

- GTC (Good ‘Til Canceled Order): This type of order will remain valid until it is fully filled or canceled.

- IOC (Immediate or Cancel Order): If this type of order cannot be filled immediately at the specified price, the unfilled part will be canceled.

- FOK (Fill or Kill Order): This type of order will be canceled immediately if all orders cannot be filled.

Market Order

The market order will be filled at the best price available in the order book at the time. The order can be quickly filled without having the trader set the price. The market order guarantees the execution of orders but not the execution price, as it may fluctuate depending on market conditions. Market orders are typically used when a trader needs to make a quick entry to capture a market trend.

Stop Limit Order

If the trigger price is set, when the benchmark price (market price, index price, fair price) selected by the user reaches the trigger price, it will be triggered, and a limit order will be placed at the order price and quantity set by the user.

Stop Market Order

If the trigger price is set, when the benchmark price (market price, index price, fair price) selected by the user reaches the trigger price, it will be triggered, and a market order will be placed with the quantity set by the user.

Note: The user’s funds or positions will not be locked when setting the trigger. The trigger may fail due to high market volatility, price restrictions, position limits, insufficient collateral assets, insufficient closeable volume, futures in non-trading status, system issues, etc. A successful trigger limit order is the same as a normal limit order, and it may not be executed. Unexecuted limit orders will be displayed in active orders.

TP/SL

TP/SL refers to the pre-set trigger price (take profit price or stop loss price) and trigger price type. When the last price of the specified trigger price type reaches the pre-set trigger price, the system will place a close market order according to the pre-set quantity in order to take profit or stop loss. Currently, there are two ways to place a stop loss order:

• Set TP/SL when opening a position: This means to set TP/SL in advance for a position that is about to be opened. When the user places an order to open a position, they can click to set a TP/SL order at the same time. When the open position order is filled (partially or fully), the system will immediately place a TP/SL order with the trigger price and trigger price type pre-set by the user. (This can be viewed in open orders under TP/SL.)
• Set TP/SL when holding a position: Users can set a TP/SL order for a specified position when holding a position. After the setting is complete, when the last price of the specified trigger price type meets the trigger condition, the system will place a close market order according to the quantity set in advance.

Isolated and Cross Margin Mode

Isolated Margin Mode: A mode that allocates a certain amount of margin to a position.

Cross Margin Mode: A margin model that uses all available balance in the account for the position.
 

Differences between Coin Margined Perpetual Futures and USDT Margined Perpetual Futures

• In USDT margined perpetual futures, valuation and pricing are in USDT, with USDT also used as collateral, and PNL calculated in USDT. Users can engage in diverse futures trading by holding USDT.
• For Coin margined perpetual futures, pricing and valuation are in US dollars (USD), utilizing the underlying cryptocurrency as collateral, and calculating PNL with the underlying crypto. Users can participate in specific futures trading by holding the corresponding underlying crypto.

• The value of each contract in USDT margined perpetual futures is derived from the associated underlying cryptocurrency, exemplified by the 0.0001 BTC face value for BTCUSDT.
• In Coin margined perpetual futures, the price of each contract is fixed in US dollars, as seen in the 100 USD face value for BTCUSD.

• In USDT margined perpetual futures, the collateral asset required is USDT. When the price of the underlying crypto falls, it does not affect the value of the USDT collateral asset.
• In Coin marginedperpetual futures, the collateral asset required corresponds to the underlying crypto. When the price of the underlying crypto falls, the collateral assets required for the users’ positions increase, and more of the underlying crypto is needed as collateral.