What are the risks associated with trading inverse perpetual and inverse futures in the cryptocurrency market?

3 answers

• Dec 25, 2021 · 3 years ago
  Trading inverse perpetual and inverse futures in the cryptocurrency market can be risky due to the high volatility of cryptocurrencies. The value of cryptocurrencies can fluctuate significantly within a short period of time, which can lead to substantial losses for traders. Additionally, inverse perpetual and inverse futures contracts can amplify the impact of price movements, potentially resulting in even larger losses. Traders should carefully consider their risk tolerance and only invest what they can afford to lose.
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• Dec 25, 2021 · 3 years ago
  One of the risks associated with trading inverse perpetual and inverse futures in the cryptocurrency market is the possibility of liquidation. If the price of the underlying cryptocurrency moves against the trader's position, it can trigger a liquidation event where the trader's position is forcibly closed. This can result in significant losses, especially if the trader is highly leveraged. It is important for traders to closely monitor their positions and set appropriate stop-loss orders to manage the risk of liquidation.
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• Dec 25, 2021 · 3 years ago
  When trading inverse perpetual and inverse futures in the cryptocurrency market, it is crucial to consider the funding rate. Inverse perpetual contracts often have a funding mechanism that ensures the contract's price stays close to the underlying index. However, this funding rate can be positive or negative, depending on the market sentiment. Traders should be aware that they may need to pay or receive funding fees periodically, which can affect their overall profitability. It is important to factor in these funding costs when calculating potential returns.
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