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How to start trading on Phemex exchange
Do you want to trade Derivatives, Spot, and Perpetual Contract?
Register on Phemex for free and start trading by following the steps below.
- Log in to Phemex.com and click the Spot Trading button in the center of the header to navigate to the Spot Trading Page.
- Click your desired symbol or coin from Select Market in the top left corner of the page.
- From the Order Module on the left side of the page, select Market.
- From the drop-down menu below the Limit Price, select either USDT to enter the amount you wish to spend or select your Symbol/Coin to enter the amount you wish to receive.
- Click Buy to display a confirmation window.
- Click the Confirm button to place your order.
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What are Cryptocurrency Derivatives?
Cryptocurrency derivatives are secondary contracts or financial instruments that reproduce value from the underlying asset.
In this case, the primary asset is a cryptocurrency such as Bitcoin.
The most popular cryptocurrency derivatives are cryptocurrency futures, cryptocurrency options, and perpetual contracts.
Cryptocurrency Trading Methods introduced the concepts of cryptocurrency exchanges and spot markets. There are derivative contracts trading on many exchanges, including Phemex.
Phemex currently ranks 6th in the CoinMarketCap exchange rankings and is a safe exchange with daily trading volume of 6-10 billion.
In addition, if you use the spot market, you have the advantage of being able to trade in the spot without paying a fee.
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Cryptocurrency derivatives market vs. cryptocurrency spot market
The spot market allows traders to buy and sell Bitcoin at any time, but there are restrictions.
For example, suppose you bought Bitcoin (BTC) on the spot market.
You can only earn profit when the price of Bitcoin rises. Conversely, when the price of Bitcoin falls, the person holding the Bitcoin loses.
Even those who are lucky enough to sell before the big drop and buy back at a lower price will eventually have to rebound to make a profit.
Derivatives, on the other hand, allow you to trade contracts that follow the Bitcoin price without actually owning them.
Description of traditional derivative markets
An example of a traditional derivatives market is best illustrated by real assets.
Imagine making a guess about the price of oil. You can actually buy a barrel of oil and sell it when the price of oil goes up.
Of course, buying your own is impractical and expensive, as you also have to consider main and shipping charges.
A much better approach is to trade a commodity or contract whose price is tied to the price of oil.
Cryptocurrency derivatives market description
These contracts are contracts that you have entered into with the other party.
Coming back to Bitcoin, you believe the price of Bitcoin will go up, while others say that the price of Bitcoin will go down.
If the price moves in a certain direction after a period of time, one party can enter into a contract stating that they must pay the price difference.
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Examples of Bitcoin Derivatives Trading
For example, if the price of Bitcoin is $10,000, you bet on a rise and your opponent bets on a fall because you think it will fall. If the price at the time of closing rises to $11,000, the opponent betting on the decline will have to pay you $1,000.
However, if the price goes down to $9,000, on the other hand, if you bet on the upside, you will have to pay $1,000 to your opponent.
As you can see, these trades or contracts allow traders or investors to earn money even when prices fall without having to own the underlying asset.
Bitcoin derivatives trade roughly in this context, but the reality is that there are many unique variations.
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Most Popular Cryptocurrency Derivatives
The most popular derivatives in the cryptocurrency industry are futures, options and perpetual contracts.
What is Bitcoin Futures?
As explained above, a Bitcoin futures is simply a contract or bilateral agreement to buy and sell Bitcoin at a fixed price on a specific future date (to name it).
However, neither party is actually required to hold its underlying asset, bitcoin, instead, they simply enter into a contract in US dollars or other agreed-upon currency.
What distinguishes futures contracts from other derivatives is the fixed execution date.
How to Invest in Bitcoin Futures
Let’s take the example of a person trading Bitcoin futures.
One of the first things a trader must decide is the length of the contract.
The exchange offers a variety of options: weekly, bi-weekly, quarterly, etc. Let’s say you decide to make a weekly BTC contract, and if the price is $10,000, then 1 Bitcoin contract is worth $1 ($1).
In other words, 10,000 contracts are required to open a position equivalent to 1 BTC.
At this point, the trader can choose to go long (bet on a rise in price) or short (bet on a fall in price).
Whichever direction you choose, when you take a position, the trading platform basically matches you with someone going in the opposite direction.
One week later, when the contract must be signed, one of the two traders has to pay the other.
If you choose a short and the price goes down after a week, you make a profit and if the price goes up you lose.
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What is Bitcoin Options Trading?
Bitcoin options are also derivative contracts that follow the price of Bitcoin, except that they do not necessarily have to be settled over a fixed period of time.
The reason these options are called options is that they tell traders to buy at a predetermined price on a specific future date.
Because it gives you a choice or right to buy or sell.
How to trade bitcoin options – Options Basics: Call and Put Options
Call option = right to buy. The right to buy at a pre-agreed price on or before a specified date is called a call option.
Put option = right to sell. The right to sell at a pre-agreed price on or before a specified date is called a call option.
It is entirely up to the owners to exercise their rights either way.
Bitcoin Options Example
For example, if you buy a call option on BTC that expires in one week for $10,000, this is an option that allows you to buy 1 BTC for $10,000 regardless of the price after one week (you can buy an asset in the future).
This means that you will have a “strike price” (called the strike price).
If the price of BTC goes up to $11,000, you will definitely exercise your right because you can buy BTC cheaper and sell it for $1,000 profit.
If the price drops below $10,000, you You can choose to let the option expire as buying BTC at a silver “strike price” will lead to losses.
It is important to understand that options do not offer investors a risk-free trading method of trading cryptocurrency derivatives.
Each option has its own price, called a premium, which depends on market conditions.
So, even if a trader allows an option to expire without exercising its right to buy or sell, you will also lose the premium paid for that option.
What is Bitcoin Perpetual Swap/Contract?
Unlike futures and options, Bitcoin perpetual contracts are derivatives that do not have an expiration or settlement date.
Traders can hold their positions as long as they want under certain conditions.
One of these is that your account must have a minimum amount of Bitcoin’s margin (=margin).
Another factor you must know is the funding cost. This is a special mechanism that helps to bind perpetual contracts in Bitcoin.
Because of that time limit, the price of a futures contract will always converge with the price of the underlying asset at expiration.
However, since the perpetual contract never expires, the contracted price may start to diverge significantly from the Bitcoin market price.
The solution to this problem is to have one side of the trader pay the other side.
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How to trade perpetual contracts?
For example, if too many traders have long positions and the price of the BTC perpetual contract is rising excessively above the spot price of BTC, people will not think about taking a short position.
This scenario will result in a positive (+) funding rate.
When the funding fee is positive (+), all long positions must pay a funding fee to short positions.
When the funding fee is negative (-), the short position must pay the long position the funding fee.
These funding payments help to incentivize traders to close long positions, take short positions and lower the price to match the real market price of Bitcoin.
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Bitcoin Perpetual Contract Example
Again, let’s take an example. A BTC/USD perpetual contract on Phemex is worth 1 BTC.
If the price is 10,000 dollars, there are 10,000 contracts equivalent to 1 BTC.
If you are in a long position, you can hold your long position until the price rises to a satisfactory level.
This period can be hours, days, or even months.
Once you decide to close your position, the exchange will take care of paying the difference between your entry price and the current market price.
This money is essentially coming from other traders who have lost money by taking short positions.
The only fees you should consider are the aforementioned funding fees and additional exchange fees.
Cryptocurrency Derivatives Leverage
The scenario described above is the simplest way to trade perpetual contracts.
However, Phemex has another feature that you can incorporate into your trading.
Leverage allows you to trade positions that are worth much higher than your original margin.
Phemex exchange allows you to trade any pair with leverage of up to x100.
For example, if you use 100x leverage when making a trade, starting at $100 means that you can trade a position that is 100 times that of $10,000.
As the expected return increases, so does the risk.
The more leverage you use, the more likely you are to lose all your money with small price movements.
As always, please do your own research on any financial product, practice before you actually invest, and don’t take the many risks of losing money.
How to trade cryptocurrency? The description of Spot Trading
The best way to trade cryptocurrencies like Bitcoin is through an exchange platform.
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What is a cryptocurrency exchange?
A cryptocurrency exchange platform is a business (platform) that allows you to buy, sell and trade digital currencies.
For example, in the Phemex exchange, there is a ‘ Buy Cryptocurrency ‘ page where you can select the cryptocurrency you want to purchase, the number, and payment method.
Optional ways to purchase include credit card, bank transfer, Apple Pay, and more.
The most important part of this process is to accurately enter the destination of the newly purchased cryptocurrency and the wallet address where you can store the cryptocurrency.
Wallets come in many different forms, but remember that the most convenient option for trading is a pre-made wallet (= exchange wallet).
The exchange wallet simply needs to find the deposit address of the cryptocurrency on the “Assets” page of your exchange account, copy it, and paste it into the relevant deposit address field.
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Perpetual contracts and our desire to make money
Perpetual contracts started as inverse cryptocurrency futures contracts.
The original purpose of perpetual contracts was to avoid legal problems that would arise from bringing fiat currency into its original manner.
What this means is that instead of having the contract in USD dollars, the perpetual contract is in BTC as the underlying asset.
This also means that the margin invested to hold a certain position is also marked as an underlying asset.
Think how special this method is.
For example, if you are trading a traditional asset such as gold, you will pay USD instead of contracting futures contracts with gold as a margin.
If the asset is not delivered in physical form, the
What is the cryptocurrency spot market?
The spot market is another service that PEMEX Exchange provides to trade (buy or sell) your cryptocurrency with other users.
All transactions, as the name implies, are instantaneous when the price matches the spot (cryptocurrency).
Every spot market consists of buyers, sellers and an order book. Buyers enter the market by buying or charging the highest price they can consume (which they can use).
Conversely, the seller either bids the asset at the lowest price he is willing to sell or enters the market at the offer price.
The order book is a list of all these prices.
The image above is a capture of the BTC/USDT spot market order book.
Here in certain markets you can buy BTC with USD or sell BTC with USDT.
When we deposit BTC on most derivatives exchanges, if our BTC is in our trading wallet, we are already greedy for BTC.
Imagine that one Bitcoin is currently trading at $10,000.
If we deposit 1 BTC on an exchange, we are already greedy for Bitcoin.
If we open a perpetual contract equivalent to 10,000 contracts via cross-margin, this would mean that we currently have 2 BTC exposed.
USDT is
At the same time as a stablecoin, the value of the stablecoin is always equal to the US dollar.
have value mentioned that.
In this example, we will use two stablecoins (USDT and USD) interchangeably.
In the red part, you can see that you can buy BTC at the best price. This price is what sellers are currently offering to sell bitcoin.
Amounts available for purchase may vary, but prices are shown per BTC.
In green, you can see the maximum price that buyers are willing to spend to buy BTC, which is again presented as a price per BTC.
The ‘BTC amount (number of BTC)’ column shows how many actual BTC quantities per price, and the ‘Value (USDT)’ column shows how much each amount is in dollars.
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How to trade in the cryptocurrency spot market?
For example, if you are the highest bidder, the value on your order will tell you that you can buy 0.51999 BTC or $6,890.39 at a price of $13250.78.
If you want more BTC than this, you will have to buy the remaining number of BTC at the next higher price of $13250.81.
Once you have successfully purchased the desired number of BTC, the order book will automatically update these quantities and prices, and remove the price and quantity from the order book accordingly.
This means that liquidity (possibility of buying an asset and the number of trades in an asset) disappears from your order book.
This is known as a “limit order”, which means an automatically executed order for the best price.
Limit orders are a fast and convenient way to ensure the execution of a trade. Alternatively, you can order at a price lower than the highest selling price.
Note that there is a difference of $2.66 between the lowest selling price and the highest buying price.
This difference is known as the SPREAD.
Any price you order within the spread will be added to your order book immediately.
For example, if you place a buy order for 0.5 BTC at a price of $13250.0, the new bid will be added above the current highest purchase price shown in the image above.
In this case, you are adding liquidity to the order book.
It will not be concluded until one or many sellers agree to sell BTC at the price you want.
This is called limit order.
You can offer at a limited price you like, but the downside is that there is no guarantee that someone will agree to the price you want, and your order may not be executed forever.
As you can imagine, liquidity plays an important role in any market.
The more liquidity you have, the more options you have (buyers, sellers, selling prices) and the more likely it is that a buy or sell order will actually be completed (fulfilled).
Once you (the buyer) and the seller agree on the desired price, the correct amount of USDT is immediately removed from your account and the corresponding number of BTC is recorded.
Such trading activity (immediate execution) “almost occurs in popular cryptocurrency assets.”
Phemex currently provides an environment for trading 14 cryptocurrencies in USDT.
This is the most basic and direct way to trade cryptocurrencies.
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How to make money by trading bitcoin?
To make money by trading bitcoin, you buy bitcoin at a lower price and sell it at a higher price.
The above method is much easier to explain.
Obviously, it is impossible to predict the future with 100% accuracy.
However, we can make learned (reasonable) guesses based on some informational advantage.
By following the news rigorously and meticulously and studying all the factors that influence the price of Bitcoin, you may start to recognize certain trends or patterns in Bitcoin.
Finding effective buy or sell signals is not easy, but with hard work it can be done.
(We tell Bitcoin traders how to manage emotions during trading. Here are some tips for you.)
If you are confident that you have developed such a system, all you have to do is use the methods presented above to buy more bitcoins when the price is low and, you sell when you believe the price has peaked or is about to fall.
Once it falls, you can repeat this process of buying more bitcoins indefinitely to earn money.
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Trading for Difference (aka. Bundles) in the Crypto Market
Another method worth mentioning is what is known as arbitrage.
There are many exchanges as well as PHEMEX in the cryptocurrency market.
There will be many instances where the price of Bitcoin on each exchange will vary slightly.
This is because the spot price of BTC depends on the power of supply and demand on each exchange.
In one exchange, when a seller makes a profit, the price goes down, whereas in an exchange with too many buyers, the price inevitably rises. (EX. Law of Supply and Demand)
First, you can theoretically buy Bitcoin on an exchange for a lower price and then sell it on the exchange for a higher price.
In practice, the odds of a beginner being successful in arbitrage are very low.
The first thing you need to do (to arbitrage) is to get the timing right.
Arbitrage opportunities can be noticed by those who have sophisticated trading algorithms that automatically trade in the market.
The important thing is that the price difference is temporary, not continuous.
The next thing to consider is that there are also additional costs.
Assuming you do it before everyone else, you can outsmart your potential returns with transfers and transactions.
Nevertheless, arbitrage opportunities exist, and with the right tools to help you, you can still make money.
Invest in cryptocurrency for the long term
Finally, perhaps the best and easiest approach is to look at it as a long-term investment.
After you have studied the basic principles of the cryptocurrency project you are interested in, and have confirmed that the project has intrinsic value and potential for growth, you should make an investment decision.
Bitcoin is a good example of an asset that many people think has a lot of difficulty in forming value in the beginning, but it will eventually be recognized in value over time.
When buying a promising cryptocurrency and simply holding it, you don’t have to worry about the price or the news by empathizing with it.
When you are comfortable with reaching your target profit, you can sell your cryptocurrency.
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Liquidation of Bitcoin Long Position
Liquidation is the part we care about.
Using the example mentioned above, we are basically using BTC as a single underlying margin, using 2x leverage.
In that case, if the price drops by 50% (if it decreases), it will be liquidated.
spot exchange here can benefit from spot exchanges and/or contracts of equal value in your USD wallet.
We may store gifts and in-kind separately.
We can simply hold a certain amount of spot BTC aside and use the leverage on long or short term contracts without worrying about spot exposure.
One thing to note about the perpetual contract (inverse) is that since we are trading with the default currency, if we are in a long position, the profit we earned in BTC will occur at a decreasing rate, and conversely, our loss will increase.
Our “profit and loss” curve will be non-linear.
For example, 1 contract = 1 dollar USD on Phemex, but it is paid in BTC.
If BTC is currently $10,000, that means 0.0001 BTC is worth 1 contract.
If BTC now rises to $11,000, it would be worth 0.00009 BTC per contract.
Whenever BTC rises, the value of a single contract decreases in BTC.
So, in a nutshell, because you made a profit on a long position in BTC, you will be settled in BTC, but you will be paid a small amount because BTC itself is more expensive compared to USD.
On the other hand, if BTC/USD depreciates, the rate at which you will lose BTC increases because BTC itself is cheaper than USD.
This means that because we receive margin in BTC, long positions will be liquidated faster than short positions.
The opposite happens when we short BTC, and if the price moves against our position, it will take longer to liquidate.
Perpetual contracts (inverse) are a very useful investment method that traders use to reduce the risk of cross positions and increase their exposure above spot BTC.
It is especially important for traders to understand not only how to profit from perpetual contracts, but also the risks involved.
In the cryptocurrency market, there is a special way to earn money by maintaining long positions.
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Please check Phemex official website or contact the customer support with regard to the latest information and more accurate details.
Phemex official website is here.
Please click "Introduction of Phemex", if you want to know the details and the company information of Phemex.
Comment by Hans
April 24, 2024
as I am trading here various assets, for me it's the most important feature. i mean, flexibility in tradable markets. i alternate trading styles, meaning that sometimes I trad...