View source for Perpetual swap strategies

=== Perpetual Swap Strategies: A Beginner's Guide ===

== What are Perpetual Swaps? ==

Perpetual swaps, often called perpetual futures, are a type of derivative in the [[cryptocurrency]] world. Think of them as agreements to buy or sell a cryptocurrency at a specific price *on a future date*, but without an expiration date. Unlike traditional [[futures contracts]], perpetual swaps don't require you to settle the contract on a set date. Instead, they use a mechanism called a "funding rate" to keep the contract price close to the spot price of the underlying asset.

Let’s break that down. Imagine you think [[Bitcoin]] will go up in price. You can open a "long" position on a perpetual swap. This is like betting that the price will rise. If Bitcoin's price *does* go up, you profit. If it goes down, you lose.  You can also open a "short" position, betting that the price will fall.

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== Key Terms ==

Before diving into strategies, let's define some important terms:

*   **Long:** Betting the price will increase. Buying a contract.
*   **Short:** Betting the price will decrease. Selling a contract.
*   **Leverage:**  Borrowing funds to increase your trading position. For example, 10x leverage means you control 10 times the amount of your actual capital.  While leverage can amplify profits, it *also* amplifies losses. See [[Leverage Trading]] for more details.
*   **Margin:** The amount of capital required to open and maintain a leveraged position.
*   **Liquidation Price:** The price at which your position will be automatically closed by the exchange to prevent further losses.  Understanding [[Risk Management]] is crucial.
*   **Funding Rate:** A periodic payment exchanged between long and short position holders. It keeps the perpetual swap price anchored to the spot price. If long positions dominate, they pay the shorts; if shorts dominate, they pay the longs.
*   **Mark Price:** The price used to calculate unrealized profit and loss, and to determine liquidation. It's based on the spot price and a moving average of the funding rate.
*   **Open Interest:** The total number of outstanding contracts. Higher open interest can indicate stronger market interest.

== Common Perpetual Swap Strategies ==

Here are a few beginner-friendly strategies:

1.  **Trend Following:** This is the most straightforward strategy. Identify an established [[uptrend]] or [[downtrend]] using [[Technical Analysis]] tools like moving averages and trendlines.
    *   **Long Trend Following:** If you identify an uptrend, open a long position.
    *   **Short Trend Following:** If you identify a downtrend, open a short position.
    *   **Risk Management:** Always set a [[Stop-Loss order]] to limit potential losses.

2.  **Range Trading:** Identify a price range where the asset consistently bounces between support and resistance levels.
    *   **Buy at Support:** Open a long position when the price reaches the support level.
    *   **Sell at Resistance:** Open a short position when the price reaches the resistance level.
    *   **Consider [[Support and Resistance]] levels for entry and exit points.

3.  **Breakout Trading:** This strategy involves capitalizing on price movements that break through key support or resistance levels.
    *   **Long Breakout:** If the price breaks *above* a resistance level, open a long position.
    *   **Short Breakout:** If the price breaks *below* a support level, open a short position.
    *   **Confirm Breakouts:** Look for increased [[Trading Volume]] to confirm the breakout is genuine.

4. **Scalping:** A short-term strategy aiming for small profits from frequent trades. Requires quick decision-making and understanding of [[Order Books]].

== Comparing Strategies ==

Here's a quick comparison of the strategies:

{| class="wikitable"
! Strategy
! Risk Level
! Time Horizon
! Complexity
|-
| Trend Following
| Moderate
| Medium to Long Term
| Low
|-
| Range Trading
| Moderate
| Short to Medium Term
| Moderate
|-
| Breakout Trading
| High
| Short Term
| Moderate
|-
| Scalping
| Very High
| Very Short Term
| High
|}

== Practical Steps to Start Trading ==

1.  **Choose an Exchange:** Select a reputable cryptocurrency exchange that offers perpetual swaps like [https://www.binance.com/en/futures/ref/Z56RU0SP Register now] or [https://partner.bybit.com/b/16906 Start trading] Bybit.
2.  **Fund Your Account:** Deposit cryptocurrency (usually USDT or BUSD) into your exchange account.
3.  **Select a Perpetual Swap:** Choose the cryptocurrency pair you want to trade (e.g., BTCUSD).
4.  **Choose Leverage:** Select your desired leverage level carefully. Start with low leverage (e.g., 2x or 3x) until you gain experience.
5.  **Place Your Order:** Open a long or short position based on your chosen strategy.
6.  **Set Stop-Loss and Take-Profit Orders:** Protect your capital and lock in profits.
7.  **Monitor Your Position:** Keep an eye on your position and adjust your strategy as needed.

== Risk Management is Key ==

Perpetual swap trading is inherently risky due to leverage. Here are some essential risk management tips:

*   **Never risk more than you can afford to lose.**
*   **Always use stop-loss orders.**
*   **Start with low leverage.**
*   **Understand the liquidation price.**
*   **Diversify your portfolio.**
*   **Stay informed about market news and events.** See [[Market Analysis]].

== Further Learning ==

*   [[Cryptocurrency Exchanges]]
*   [[Order Types]]
*   [[Technical Indicators]]
*   [[Fundamental Analysis]]
*   [[Trading Psychology]]
*   [[Candlestick Patterns]]
*   [[Fibonacci Retracements]]
*   [[Bollinger Bands]]
*   [[Moving Averages]]
*   [[Relative Strength Index (RSI)]]

[[Category:Crypto Basics]]

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=== Learn More ===
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⚠️ *Disclaimer: Cryptocurrency trading involves risk. Only invest what you can afford to lose.* ⚠️