Understanding perpetual trading opportunities is very important for investors and traders in finance and trading. Perpetual trading opportunities refer to the continuous possibility of profiting from changes in asset prices in financial markets.
Economic, political, and social events influence fluctuations in financial markets. Therefore, understanding perpetual trading opportunities helps market players respond better to these changes. In addition, a good understanding of trading opportunities also allows market players to manage risk, make data-based decisions, and implement effective trading strategies.
Please note in the decentralized finance (DeFi) ecosystem; there is a platform that provides derivative trading facilities at affordable costs, comfort, and speed, namely dYdX. Meanwhile, dYdX is a decentralized financial protocol built on blockchain technology (perpetual trading) that allows trading and exchanging crypto derivatives.
So, to find out more about what perpetual trading is, why choose dYdX, how it works, and what perpetual trading strategies are for maximum profits, read the full review below!
What is Perpetual Trading?
Before exploring further about perpetual trading, let’s first review the concept of derivatives that is the basis of such trading. In general, derivatives are financial products whose value depends on other assets, such as shares, crypto assets, or underlying commodities. In other words, traders can have exposure to an asset without needing to own the asset directly.
However, each contract has an expiration date in conventional derivative products such as futures or futures contracts. On the other hand, perpetual trading is a unique type of futures contract because it has no expiration date. This means traders can open their buy or sell positions for unlimited time.
Currently, perpetual trading of crypto assets can be done either via centralized exchange (CEX) or decentralized exchange (DEX). As the name suggests, decentralized perpetual trading refers to perpetual trading activities carried out on DEX platforms, one of which is dYdX.
It is important to understand that perpetual contracts reach equilibrium with the spot price of the crypto asset through an adjustment payment mechanism. If the perpetual contract price exceeds the spot price, the buyer pays the seller to match the difference, and vice versa. This process also called the “funding rate,” helps keep the perpetual contract price close to the spot price of the underlying crypto asset.
If the funding rate is positive, the buyer pays the seller and vice versa. This incentivizes perpetual contract prices to reflect the crypto asset’s spot price accurately. The mechanism ensures that traders holding perpetual contracts for a certain period can follow the price movements of the underlying crypto asset without needing to open a new contract.
Why Choose dYdX?
Meanwhile, dYdX is a decentralized exchange (DEX) that allows users to engage in derivative trading (perpetual and margin), spot trading, lending, and borrowing. Professionals seeking direct access to financial services without intermediaries or traditional institutions can use this platform.
dYdX’s centralized order book model is more convenient for users familiar with traditional trading methods, as it differs from the AMM model used by Uniswap. It combines DEX-like security and transparency with CEX-like speed and ease of use.
Antonio Juliano, the creator of dYdX, has a background in computer science and is a Princeton University alumnus who graduated in 2015. After graduating, he joined Coinbase as a software engineer, where he delved into the world of crypto and became interested in Ethereum technology.
In 2017, Antonio decided to build dYdX. This project got around 2 million US dollars from Andreessen Horowitz, Polychain, and several other investors. Then, 2018 saw the joining of several key individuals with dYdX, including Brendan (now chief of architect ), Zhuoxun (head of operations, who later left and founded Magic Eden), and Bryce (software engineer).
dYdX, founded on Ethereum, now operates on StarkWare network. It offers margin trading, savings, loans, and perpetual cross-margin trading. Its transaction volume crossed $100B as of Oct ’21.
There are several advantages to using dYdX, including dYdX providing high security by using proven Ethereum blockchain technology. Users have complete control over their private keys, increasing account security. Then, the platform provides a leveraged trading feature that allows users to increase their exposure to the market without owning a comparable amount of assets.
Another advantage is that dYdX offers significant liquidity, especially with daily trading volumes in millions of dollars. Not only that, this platform also provides various analytical tools to help traders in making decisions. Technical and fundamental analysis can be accessed easily, helping users to plan more measurable trading strategies.
How dYdX Works
As a decentralized exchange platform (DEX), dYdX provides its main product, perpetual swaps (perps) or timeless trading. Perps are similar to futures contracts, allowing users to speculate on future price movements of crypto assets. However, the main difference is that perpetual swaps do not have an expiration date.
Technically, dYdX is a type of hybrid DEX that combines elements of centralization and decentralization. The centralized parts include the order book and matching engine, while the decentralized part comprises smart contracts integrated into the system.
As a result, dYdX differentiates itself from other DEXs, such as Uniswap and Pancakeswap, which adopt the Automated Market Maker (AMM) model. dYdX operates using a centralized order book, generally used in centralized exchanges (CEX). According to Antonio Juliano, using an order book is considered to have been tested and is more efficient than AMM. Juliano also stated that the order book does not require the same amount of funds as AMM to achieve the same level of liquidity. However, through updates to the dYdX V4 system, the platform plans to become a fully decentralized exchange by adopting a decentralized order book.
Perpetual Trading Strategy for Maximum Profits
Several strategies are important for traders to understand when carrying out perpetual trading. The following is a perpetual trading strategy for maximum profits, including:
1. Research before Opening a Trading Position
First, conducting in-depth research before opening a perpetual trading position is important. This includes fundamental and technical analysis to understand market trends, investor sentiment, and other factors influencing asset price movements.
2. Proper Risk Management
Risk management is key in perpetual trading. Excessive use of leverage can increase potential profits but also carries high risks. Setting acceptable risk limits and avoiding excessively high leverage to protect capital is important.
3. Discipline in Executing Trading Strategies
Discipline is very important in perpetual trading. Traders must stick to their strategy without being affected by emotions or sudden market fluctuations.
4. Continuity of Understanding and Development in the Crypto World
The world of crypto is constantly evolving; therefore, perpetual traders must keep their knowledge up to date. One platform that can help as a reference is articles on INDODAX Academy. The platform can be a means of continuously learning about changes in technology, regulations, and market trends. This will help traders to achieve maximum profits.
Conclusion
In conclusion, it is important to remember that the crypto market is known for its high volatility, and price fluctuations can occur quickly. Therefore, market players must understand that investing in crypto involves significant risks. In this regard, good risk management is the key to engaging in crypto trading safely.
Traders must always use funds they are willing to lose and manage their risks carefully. Furthermore, achieving maximum profit potential requires a good strategy that includes in-depth market analysis, effective risk management, and discipline in implementing a trading plan. This combination will help traders face market volatility more calmly and increase the chances of achieving positive results.
Let’s invest in dYdX Crypto Assets
So, now you know what perpetual trading is, why you choose dYdX, how it works, and what perpetual trading strategies are for maximum profits. Next, if you want to invest in the dYdX coin crypto asset, you can check the dYdX price first on the INDODAX market.
After you check the price, you can start investing and trading the dYdX coin crypto asset on INDODAX. It is important to know that INDODAX is a well-known and first crypto asset buying and selling platform in Indonesia with official permission, so its security is guaranteed. In addition, INDODAX users will also get access to several advanced trading features and a variety of crypto assets, including dYdX coin.
So what are you waiting for? Let’s start trading and investing in crypto with INDODAX!
