A Complete Introduction to Derivatives Trading for Beginner Traders

The Essence of Derivative Trading: A Tool for Profiting from Volatility

Derivative trading involves an agreement between two parties where all deal parameters are predetermined: the underlying asset, strike price, contract volume, and duration. Essentially, it is trading cryptocurrency futures — both time-limited and perpetual.

The main advantage of derivative trading is the ability to profit regardless of market direction. If you expect the asset’s value to rise, open a long position (long). If you forecast a price decline, use a short position (short) and earn from falling quotes.

Two Main Types of Positions: Long and Short

Long Position (bullish strategy):

• Opened by buying the asset when you expect its value to increase
• Closed by selling the same asset

Short Position (bearish strategy):

• Opened by selling the asset when you expect its price to decrease
• Closed by buying back the same volume

The choice of direction depends on your market analysis and price movement forecast.

Key Components for Placing a Trading Order

Types of Trading Contracts

Perpetual Futures (Perpetuals):

• Operate indefinitely
• Automatically rollover without a set expiration date
• Ideal for long-term positions

Dated Futures (Dated Futures):

• Have a clearly defined expiration date
• Available in various cycles: weekly, monthly, quarterly
• Suitable for short-term trading

Margin Currency: choosing between USDT/USDC and cryptocurrency

Contracts Quoted in Cryptocurrency (with crypto margin):

• Price is quoted in USD, calculations are made in cryptocurrencies (BTC, ETH, and others)
• Require holding the corresponding underlying asset in your balance
• Example: trading with BTC margin requires having BTC in your account

Stable Contracts (with USDT margin):

• All calculations are in USDT
• To trade any contract type, only USDT is needed
• Easier for portfolio management

Margin Management Modes

Cross Margin (Crossed):

• All free funds in your account serve as a safety cushion
• Allows increasing capital utilization ratio
• Carries a higher liquidation risk

Isolated Margin (Isolated):

• When opening a position, a fixed amount is blocked
• This amount determines the maximum possible loss
• A more conservative approach to risk management

Trading Leverage: Profit and Risk Amplifier

Leverage multiplier determines how many times your actual stake exceeds your own funds. The higher the leverage coefficient, the greater the potential profit — but simultaneously, the risk of losses increases.

Types of Orders

Limit Order:

• You set the maximum purchase price or minimum sale price
• The system executes the deal automatically when the market price hits the specified range
• More control over the execution price

Market Order:

• The deal is executed immediately at the best available price
• Ensures quick contract execution
• Useful in urgent situations or high volatility

Position Size Determination

Order amount can be specified in various units:

• Number of contracts
• Equivalent in the underlying cryptocurrency
• Value in USDT

Important: If your account balance does not contain enough USDT, you will not be able to open a position. In this case, either reduce your trading leverage or deposit USDT.

Important Notes for Traders

Derivative trading involves significant risks. Cryptocurrency assets are subject to extreme volatility and sharp price movements. Before starting trading, carefully assess your financial situation and determine whether you are prepared for potential losses. If necessary, consult with specialists in investment, tax, or legal fields.