Cryptocurrency trading has been steadily gaining mainstream traction ever since the coronavirus pandemic struck in 2020. Globally, millions of people found a source of income in crypto trading but had to face the extreme volatility and the associated risks while trading in the open cryptocurrency markets.
Crypto derivatives are one popular choice among investors intent to earn revenues from the market price fluctuations but who aspire for a hedge against the risks of adverse price movements in the volatile crypto markets. Lately, derivatives trading across the exchanges have been on the rise owing to the exposure it offers and the leverage it guarantees to the traders. A Tokeninsight report on the cryptocurrency derivatives exchange industry found that the trading volume for Q3 of 2020 was $2.7 trillion based on the data from 42 exchanges, registering a 25.1% increase from the previous quarter.
What are Derivatives?
Derivatives are a class of financial contracts that derive their value from the performance of an underlying asset, in this case, cryptocurrencies like Bitcoin, Ether, etc. There are various types of crypto derivatives like futures, perpetual swaps, options, etc. Traders must note a few things in mind regarding derivatives:
- The value of the derivatives contract changes with the change in the price of the underlying cryptocurrency. Derivatives are another way to get exposure to an underlying cryptocurrency without being exposed to the volatility of the open crypto markets.
- Trading in derivatives doesn’t mean you buy or sell bitcoins or any other cryptos. The two parties simply agree to buy or sell a particular cryptocurrency on a predetermined date in the future and thus, earn profits from the changes in the underlying asset price.
- Derivatives can be of several kinds. The broad classification includes futures, options, swaps, perpetual swaps, and contracts for difference (CFD).
Derivatives solve three use cases, namely:
- Hedging means insurance against the adverse price movements of the underlying asset in the open market.
- Speculation where traders create leveraged pay-off profiles using a derivatives contract based on their market view.
- Access to cryptocurrencies for traders who cannot buy Bitcoin or other cryptocurrencies directly.
Derivatives Trading with Delta Exchange
Delta Exchange supports derivatives trading in futures, options, interest rate swaps, and several other innovative derivative contracts on Bitcoin and more than 50 other cryptocurrencies (check the complete list here) while offering the traders up to 100x leverage.
Delta Exchange scores over the other derivatives exchange due to its USPs, including a powerful matching engine, intuitive interface, advanced order types, lightning-fast APIs, multi-factor security, and manual review system for withdrawals. The users can deploy Robo trading strategies to earn automatic gains, yield strategies for attractive APYs, and stake DETO- the native token of the platform to earn rewards.
Trading crypto derivatives is a lot different from spot buying and selling cryptocurrencies. For derivatives trading, you need to understand the mechanics of margin trading and details of contract settlement, calculate the profit or loss before you decide to place your order. To get the hang of the basics of crypto trading, head over to our tutorial section, where you will find individual guides for all kinds of derivatives contracts that Delta supports.
For newbies that are still getting used to trading crypto derivatives, Delta Exchange has another helpful feature – Mock trading, through which traders can practice derivatives trading without any actual investment. Let’s learn how to proceed with using the awesome feature on the Delta Exchange website.
Mock Trading with Delta Exchange
Delta Exchange brings a handy learning tool – Mock Trading for beginners in crypto derivatives trading. Traders can learn crypto derivatives trading in a live trading interface without putting in any actual investment. Currently, Delta offers the mock trading terminal for futures, options, and spot trading practice sessions.
You can get on with learning derivatives trading on the testnet at the exchange until you are comfortable for the actual dive-in.
Here’s how you can start mock trading on Delta Exchange:
- To begin your first mock trading session on the exchange, click on the ‘Mock Trading’ option at the top of the exchange’s dashboard.
- You will be directed to the testnet section on the website, where you would have to sign up yourself on the testnet to use the mock trading feature. Even if you have registered on the main website, the testnet requires a separate sign-up.
- Click on the ‘Sign up’ option and fill in the required details – the country of residence, email address, and a preferably strong password. Click on the ‘register’ tab next.
- Next, you will receive a verification code on the email address you registered on the platform. Enter the code and click on ‘confirm’ to continue to the mock trading dashboard.
- You will also receive a verification email in your registered email inbox.
- You can practice crypto derivatives trading in futures, options, and spot trading. Click on the preferred crypto derivative and the type of trading pair you are interested in trading. For demo purposes, let us take the example of the Bitcoin Perpetual contract settled in USDT – a kind of Futures contract.
- The dashboard will have all the price charts showing real-time info, order book, and details about recent trades. The right-hand section is where you need to add the details about whether you want to buy or sell based on how the prices are expected to behave, the limit price, quantity of BTC, and your preferred leverage. After analyzing the technical data and charts, enter the details suitable to your risk appetite and the supposed amount you want to invest in. Click on ‘Place Order’.
- You will receive a confirmation order next. Verify the details of your BTCUSDT Perpetual contract. Once satisfied, click on place order. You will receive a pop message for the confirmation of your limit order. And you are done.
Once you understand the dynamics of price fluctuations in the open market, how order books and other features work, and how to place an order for the contract of your choice, you can begin your actual trading journey using the unique utilities offered at Delta Exchange in the safest manner.