How does perpetual trading work in Pluang?
In determining the price of a contract, perpetual futures use an index price derived from the prices of various exchanges. To keep the price of a perpetual contract in line with the spot price, a mechanism called the funding rate is used. An explanation of the funding rate will be discussed in the next section.
Unlike the spot market, which only allows traders to profit from rising prices, the perpetual market allows traders to continue to profit even if the price of the asset falls. In other words, perpetual trading offers the potential for profit when the market is bullish or bearish.
There are two types of positions that can be taken in perpetual trading:
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Long Position
A trader opens a long position when he expects the crypto price to increase. So, when the price of the crypto asset increases, the trader can close the position to realize his profit.
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Short Position
Short is the opposite of long. So, traders will open a position by borrowing crypto assets from the exchange to sell on the open market with the expectation that the price will fall. Later, traders will buy the crypto back at a lower price and return it to the exchange. The difference in price between the two then becomes the profit obtained.