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The Advantages of Perpetual Futures Trading

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2024.12.3 MEXC
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With the rapid development of the cryptocurrency market, Perpetual Futures Trading has become a preferred choice for many traders due to its unique mechanisms and flexibility. This article will detail the advantages of Perpetual Futures Trading, helping investors better understand this financial instrument.

1. No Settlement Required


One of the most notable features of Perpetual Futures is the absence of an expiration date. This means traders can hold them indefinitely without worrying about expiration or settlement issues. This characteristic offers investors significant flexibility, enabling them to adjust their position strategies based on market conditions.

2. High Leverage


Perpetual Futures typically allow for high-leverage trading, particularly appealing to risk-tolerant Futures traders. Leverage enables investors to control larger market positions with relatively small amounts of capital, amplifying potential returns (though it also comes with higher risks). This feature is especially advantageous for investors with limited funds but a high-risk tolerance.

MEXC currently supports up to 200x leverage and offers Simple Mode and Advanced Mode. Depending on your trading preferences, you can select the same or different leverage multipliers and margin modes for long and short positions in Futures Trading.


3. Two-Way Trading


The operational mechanism of Perpetual Futures follows a "two-sided market T+0" model, allowing investors to go long or short. Investors can profit not only from market uptrends but also from downturns by short selling. This ability to trade in both directions enables investors to identify profit opportunities in various market conditions.

MEXC has introduced "Take-Profit Reverse" and "Stop-Loss Reverse" features in Futures Trading to cater to investors looking to maximize returns in short-term trends. These tools help investors capitalize on two-way market movements and profit from short-term trends.

4. Funding Rate Mechanism


To ensure that the price of Perpetual Futures remains aligned with the Spot market price, the exchange has introduced a funding rate mechanism. The funding rate is based on the price difference between the Perpetual Futures market and the Spot price, with long and short traders periodically exchanging funding fees. This mechanism helps anchor the Perpetual Futures market price to the Spot price.

MEXC does not charge any user funding fees. The funding fees are exchanged between users holding positions. Generally, MEXC Perpetual Futures settle funding fees every 8 hours, at 00:00 UTC, 08:00 UTC, and 16:00 UTC. For more information on adjustments to the funding rate settlement frequency, you can refer to the [Futures Announcements] section in the [Help Center].

5. High Liquidity


Due to the high popularity of Perpetual Futures, market liquidity is typically higher. This means traders can buy or sell Futures more easily, reducing the risk of price slippage. This is a significant advantage for investors looking to enter and exit the market quickly. MEXC offers the highest liquidity globally, enabling faster transactions, smaller spreads, and more stable trading.

6. Hedging


Spot Trading only allows for long positions. Investors who hold positions in the Spot market during a bear market or a price downturn must either endure the loss of assets or choose to exit with a stop loss. However, Perpetual Futures allow investors to go long or short, enabling them to find profit opportunities in various market conditions.

For example, if an investor purchases and holds 1 BTC in Spot Trading on MEXC, to hedge against potential downside risk, they can simultaneously open a short position of 1 BTC in a Coin-M Perpetual Futures on MEXC. This way, even if the spot position incurs a loss due to a market downturn, the Futures position can generate profit to offset the risk of the market decline.

Perpetual Futures Trading has attracted a large number of investors due to its advantages, such as no expiration, high leverage, and the ability to trade both long and short. However, while enjoying these benefits, investors must also be aware of the potential risks and ensure they implement appropriate risk management strategies. As the market continues to mature, Perpetual Futures will continue to play a crucial role in cryptocurrency trading.

Disclaimer: This information does not provide advice on investment, taxation, legal, financial, accounting, consultation, or any other related services, nor does it constitute advice to purchase, sell, or hold any assets. MEXC Learn provides information for reference purposes only and does not constitute investment advice. Please ensure you fully understand the risks involved and exercise caution when investing. The platform is not responsible for users' investment decisions.