Perpetual vs. Quarterly Futures

Perpetual vs. Quarterly Futures: A Beginner's Guide

Welcome to the world of cryptocurrency futures trading! It can seem complex, but breaking down the different types of futures contracts makes it much easier to understand. This guide will focus on two common types: Perpetual Futures and Quarterly Futures. We’ll explain what they are, how they work, and the key differences to help you decide which might be right for you. Remember to always do your own research and understand the risks involved before trading. Consider starting with paper trading to practice.

What are Futures Contracts?

First, let's cover the basics of futures contracts. A futures contract is an agreement to buy or sell an asset (like Bitcoin or Ethereum) at a predetermined price on a specified future date. It's essentially a bet on the future price of that asset. You don't actually own the asset itself; you're trading a contract representing it.

**Long Position:** Betting the price will *increase*. You buy the contract hoping to sell it later at a higher price.
**Short Position:** Betting the price will *decrease*. You sell the contract hoping to buy it back later at a lower price.

Leverage is a key feature of futures trading, allowing you to control a larger position with a smaller amount of capital. While this can amplify profits, it also magnifies losses. Be extremely cautious when using leverage.

Perpetual Futures Explained

Perpetual futures contracts are designed to have *no* expiry date. Unlike traditional futures, you can hold your position indefinitely, as long as you maintain sufficient margin to cover potential losses.

**Funding Rate:** Because there's no expiry, perpetual futures use a mechanism called a "funding rate" to keep the contract price (the price you trade) close to the spot price (the current market price of the underlying asset).

   *   If the perpetual contract price is *higher* than the spot price, longs pay shorts.
   *   If the perpetual contract price is *lower* than the spot price, shorts pay longs.
   *   The funding rate is usually paid every 8 hours.

- Example:** You believe Bitcoin will rise. You open a long position on a Perpetual Bitcoin Futures contract at $30,000. If the price increases to $31,000, you can close your position and profit. However, if the price falls, you could incur losses, especially if you're using leverage. You may also have to pay or receive a funding rate depending on the market conditions. You can start trading on Register now

Quarterly Futures Explained

Quarterly futures contracts *do* have an expiry date – typically every three months (hence "quarterly"). At the expiry date, your position is automatically closed.

**Expiry Date:** The most crucial difference. You must close your position *before* the expiry date to avoid automatic liquidation.
**Settlement:** On the expiry date, the contract settles based on the spot price of the underlying asset at that time.
**Contango & Backwardation:** Quarterly futures often exhibit "contango" (futures price higher than spot price) or "backwardation" (futures price lower than spot price), affecting the contract price.

- Example:** You open a long position on a Quarterly Ethereum Futures contract expiring in March. You believe Ethereum will rise before March. If Ethereum’s price increases, you can close your position before March for a profit. If not, you can close it at a loss. If you don’t close it, it will be settled on the expiry date. Consider trading on Start trading

Perpetual vs. Quarterly: A Comparison

Here's a table summarizing the key differences:

Feature	Perpetual Futures	Quarterly Futures
Expiry Date	No expiry	Every three months
Funding Rate	Yes, to anchor price to spot	No
Settlement	No settlement; positions rolled over indefinitely	Settled at expiry based on spot price
Price Discovery	Continuous; reflects real-time market sentiment	Influenced by expiry date and term structure
Contract Rollover	Automatic; no need to manually roll over	Requires manual rollover before expiry

Which One Should You Choose?

The best type of futures contract depends on your trading strategy and risk tolerance:

**Perpetual Futures:**

   *   **Pros:** Flexibility, no expiry concerns, continuous trading.
   *   **Cons:** Funding rates can eat into profits, potentially more complex to understand.
   *   **Suitable for:** Active traders, scalpers, those who want long-term exposure without expiry.

**Quarterly Futures:**

   *   **Pros:** Simpler to understand, no funding rates.
   *   **Cons:** Requires careful monitoring of expiry dates, potential for unexpected settlement.
   *   **Suitable for:** Traders with a specific directional view for a defined period, those who prefer a more straightforward contract.

Consider using Join BingX to explore both types of futures.

Practical Steps to Get Started

1. **Choose an Exchange:** Select a reputable cryptocurrency exchange that offers futures trading. Open account and BitMEX are popular choices. 2. **Create and Verify Your Account:** Complete the account creation and verification process. 3. **Deposit Funds:** Deposit cryptocurrency into your futures trading account. 4. **Understand the Interface:** Familiarize yourself with the exchange’s futures trading interface. 5. **Start Small:** Begin with a small position size and low leverage to manage risk. 6. **Practice with Paper Trading:** Before risking real capital, use the exchange's paper trading feature to simulate trades.

Important Considerations

**Risk Management:** Always use stop-loss orders to limit potential losses.
**Leverage:** Understand the risks of leverage and use it responsibly.
**Market Volatility:** Cryptocurrency markets are highly volatile. Be prepared for rapid price swings.
**Trading Fees:** Be aware of the trading fees charged by the exchange.
**Stay Informed:** Keep up-to-date with the latest market news and analysis. Read about technical analysis and fundamental analysis.

Further Learning

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Binance	Largest exchange, 500+ coins	Sign Up - Register Now - CashBack 10% SPOT and Futures
BingX Futures	Copy trading	Join BingX - A lot of bonuses for registration on this exchange

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Try Bybit (For futures trading)

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Join our Telegram community: @Crypto_futurestrading

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

Perpetual vs. Quarterly Futures

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