USDT Perpetual

Refers to a specific type of perpetual contract denominated in Tether.

Perpetual Contract: a type of derivative contract that does not have an expiration date. Unlike traditional futures contracts, which have set expiration date., these aim to closely track the spot market price of the underlying asset.

Here's how leverage works in a USDT perpetual contract:

1. Leverage Ratio: Leverage is often expressed as a ratio, such as 10x, 20x, or 100x. This ratio indicates how much the position size is multiplied compared to the amount of margin deposited. For example, with 10x leverage, a $1,000 margin can control a position worth $10,000.
2. Leveraged Position: When you use leverage to enter a leveraged position, you are essentially borrowing funds from the exchange to increase your trading exposure. This allows you to take larger positions than your available account balance would normally allow.
3. Initial Margin: To open a leveraged position, you need to provide an initial margin. The initial margin is a percentage of the total position value that you need to deposit as collateral. The required initial margin varies based on the leverage ratio and the specific exchange's rules.
4. Maintenance Margin: In addition to the initial margin, exchanges often require a maintenance margin to keep the position open. If the position's value moves against you and your equity (account balance) falls below the maintenance margin, you might face liquidation.
5. Liquidation: When the market moves significantly against your leveraged position and your equity drops below the maintenance margin, the exchange may liquidate your position to prevent further losses. Liquidation involves closing your position and returning the borrowed funds to the exchange.
6. Risk and Reward: While leverage can amplify gains, it also amplifies losses. A small market movement against your position can result in significant losses when trading with high leverage. Proper risk management and position sizing are crucial when using leverage.
7. Short and Long Leverage: You can use leverage for both long (buy) and short (sell) positions. For example, with 10x leverage, you can enter a long position with 10 times your margin or a short position with 10 times your margin.

Margin Modes

Here's an explanation of both margin modes:

1. Cross Margin Mode:
   • In Cross margin mode, the available balance in your trading account is shared among all your open positions. This means that the profit or loss from one position can be used to cover the margin requirements of another position.
   • Cross margin aims to reduce the risk of liquidation by utilizing the overall account balance to maintain open positions. If the equity (account balance) of your trading account falls too close to the maintenance margin level for a position, the exchange may allocate additional funds from your account to prevent liquidation.
   • Cross margin is suitable for traders who want to manage risk across all their open positions collectively.
2. Isolated Margin Mode:
   • In Isolated margin mode, each position has its own dedicated margin that is separate from other positions. The margin allocated to one position is not used to cover the margin requirements of other positions.
   • Isolated margin allows traders to have more control over the risk exposure of individual positions. Profits and losses from one position do not affect the margin or liquidation risk of other positions.
   • Isolated margin is suitable for traders who want to allocate specific amounts of margin to each position and manage risk on a per-trade basis.

Choosing Between Cross and Isolated Margin: The choice between Cross and Isolated margin modes depends on your trading strategy, risk tolerance, and preference for managing positions:

• Cross Margin: If you are comfortable with using your overall account balance to manage risk and want to avoid individual liquidations by spreading the risk across multiple positions, cross margin may be suitable.
• Isolated Margin: If you want more control over the risk exposure of individual positions and want to prevent the losses of one position from affecting others, isolated margin may be preferred.