OKEx is the second largest cryptocurrency exchange in the world by daily volume. This sort of high profile is allowing OKEx to make some innovative moves in the industry.
This is recently evidenced by their announcement of a new kind of trading to be offered for the first time. Perpetual swap trading starts December 11, 2018.
Perpetual swap trading will be familiar, in certain ways, to anyone who understands futures trading. Like futures trading, perpetual swap allows users to buy a digital asset at a specified price at a future time. A trader might choose this, for instance, if they believe that Bitcoin is going to crash next week. Here, they’d choose to sell Bitcoin, at its current market price, at a future date. If Bitcoin were to drop in value, that sale price would result in a profit after the crash occurs. Such a sale would be called a “short” position. To try to take advantage of future price gains would be called a “long” position.
Both short and long positions are possible with perpetual swap trading. But the similarities with futures trading stop here. Perpetual swap really is a novel trading form, never before performed on any other crypto exchange we’re aware of.
What’s Unique About Perpetual Swap Trading?
Perpetual swap trading at OKEx has notable similarities to other types of futures trading
With perpetual swap, there’s no daily settlement at the end of each day. Neither is there any set expiration time with each trade. Just like the name implies, each trade can continue in perpetuity.
Combining this with leverage and margin trading, traders could potentially amplify gains and losses well beyond the balance of their trading account. For this reason, perpetual swap is a very risky order type. Just as gains may be compounded using this strategy, losses can grow out of control in short order.
For this reason, OKEx urges users to employ careful risk management strategies when using perpetual swap. Only time will tell if professional traders can actually use this order type for gains above and beyond what is available through other futures trading forms. If customers like it as much as OKEx seems to hope, then we can reasonably expect other major crypto exchanges to start offering competitor services soon. Who knows? We may even see perpetual swap in conventional securities markets in the not too distant future.
For now, perpetual swap sounds like a good way to invest efficiently (lower commission and trading fees due to no daily settlement), if futures strategies were what you were going to be using anyway. We wouldn’t recommend that anyone but experienced investors try, but if you do take the plunge, we’d be interested to hear your experience in the comments!
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