Contract trading has become one of the most powerful tools in the cryptocurrency market, enabling traders to profit not only when prices rise but also when they fall. Unlike spot trading—where you buy and hold digital assets—contract trading allows you to speculate on price movements using leverage, opening up more strategic opportunities. This guide will walk you through everything you need to know about perpetual and delivery contracts, including how they work, how to trade them, and key differences between USDT-margined and coin-margined positions.
Whether you're a beginner or looking to refine your strategy, this comprehensive overview ensures you understand the mechanics behind contract trading while staying aligned with best practices.
Understanding Contract Trading
At its core, contract trading lets investors profit from both rising and falling cryptocurrency prices by taking either long (buy) or short (sell) positions. When you go long, you expect the asset's price to increase; when you go short, you anticipate a decline.
For example:
- If you open a long position on Bitcoin (BTC) and the price rises, you earn a profit.
- If the price drops, you incur a loss.
- Conversely, if you open a short position and BTC falls in value, you profit—even in a bear market.
This flexibility makes contract trading especially valuable during volatile or downward-trending markets, where traditional spot traders may struggle to generate returns.
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Types of Crypto Contracts: Perpetual vs. Delivery
Crypto exchanges like OKX offer two main types of contracts: perpetual contracts and delivery (or futures) contracts. Each serves different trading strategies and time horizons.
Perpetual Contracts
Perpetual contracts have no expiration date, meaning they can be held indefinitely. To keep the contract price closely aligned with the underlying asset’s spot price, a mechanism called funding rate is used.
- When more traders are long, longs pay funding fees to shorts.
- When more traders are short, shorts pay funding fees to longs.
This incentivizes balance in the market and prevents extreme divergence between contract and spot prices.
Because perpetual contracts don’t expire, they’re ideal for traders who want flexibility in holding positions over extended periods without worrying about settlement dates.
Delivery Contracts
Also known as futures contracts, delivery contracts have a fixed expiration date—such as weekly, bi-weekly, quarterly, or next-quarter. When the contract expires, all open positions are automatically settled based on the average index price over the final hour before expiry.
These are better suited for traders with a specific market outlook over a defined timeframe. For instance:
- Weekly delivery contracts suit short-term strategies.
- Quarterly contracts appeal to those with longer-term forecasts.
After settlement, any profit or loss is reflected in your account balance.
Margin Types: USDT-Margined vs. Coin-Margined
Within both perpetual and delivery contracts, traders can choose between two margin types:
1. USDT-Margined Contracts
- Denominated and settled in stablecoins like USDT.
- Profits and losses are calculated in USDT.
- Ideal for traders who prefer consistent fiat-like valuation and easier risk management.
Example: You open a BTC/USDT perpetual contract. Your margin, P&L, and liquidation price are all displayed in USDT.
2. Coin-Margined Contracts
- Denominated in the base cryptocurrency (e.g., BTC, ETH).
- Margin and profits are held in the same coin.
- Often used by experienced traders who already hold significant amounts of crypto and don’t mind volatility in their margin value.
Example: A BTC/USD coin-margined contract uses BTC as collateral. If BTC’s price swings dramatically, so does your effective margin level.
Choosing between these depends on your risk tolerance, portfolio composition, and trading goals.
How to Start Contract Trading: Step-by-Step Guide
Ready to dive in? Follow these steps to begin trading contracts confidently.
Step 1: Set Up Your Account Mode
Before placing trades, ensure your account is set to either:
- Single-currency margin mode: Isolates risk per asset.
- Multi-currency margin mode: Uses multiple assets as collateral for greater flexibility.
Choose based on whether you want isolated risk control or enhanced leverage potential.
Step 2: Transfer Funds to Your Trading Account
Move funds from your wallet or funding account into your derivatives trading account. This step is essential even if you already own crypto—funds must be allocated specifically for contract trading.
👉 Learn how to securely transfer funds and start trading in minutes.
Step 3: Select Contract Type
On the trading interface:
- Click the dropdown next to the trading pair.
- Search for your desired cryptocurrency.
- Choose Perpetual or Delivery under margin trading.
Select the appropriate contract:
- For perpetual: Pick USDT-margined or coin-margined.
- For delivery: Choose week, bi-week, quarter, etc.
Step 4: Configure Trade Parameters
Set the following:
- Leverage: Adjust according to your risk appetite (e.g., 10x, 25x). Higher leverage increases both potential gains and liquidation risk.
- Order type: Limit order (set price), market order (instant execution), or conditional orders.
- Position size: Enter quantity based on available margin.
Then click:
- Buy Open Long if you expect price increases.
- Sell Open Short if you predict a decline.
Unfilled orders can be canceled anytime before execution.
Step 5: Monitor and Manage Your Position
Once your order fills:
- View active positions in the positions tab.
- Track key metrics: margin used, unrealized P&L, ROI, estimated liquidation price.
- Set take-profit and stop-loss orders to automate exits and manage risk.
- Close manually by entering a price or use market close all for immediate exit.
Smart risk management is critical—always know your liquidation threshold.
Frequently Asked Questions (FAQ)
Q1: What is the difference between spot trading and contract trading?
Spot trading involves buying actual cryptocurrency at current market prices. Contract trading allows speculation on price movement without owning the asset, using leverage and enabling short selling.
Q2: Can I lose more than my initial investment in contract trading?
No—on reputable platforms like OKX, losses are limited to your margin balance due to automatic liquidation mechanisms. However, high leverage increases risk significantly.
Q3: What is funding rate in perpetual contracts?
The funding rate is a periodic payment exchanged between longs and shorts to keep the contract price close to the spot price. It’s paid every 8 hours and varies based on market sentiment.
Q4: Which is safer: USDT-margined or coin-margined contracts?
USDT-margined contracts are generally considered safer for beginners because P&L is stablecoin-denominated, reducing exposure to additional volatility from fluctuating margin values.
Q5: When does a delivery contract settle?
Delivery contracts settle automatically at expiration—typically based on the average index price during the last hour. All open positions are closed at that rate.
Q6: How do I avoid liquidation?
Use conservative leverage, monitor your margin ratio closely, set stop-loss orders, and avoid overexposure. Increasing your margin manually during adverse moves can also help prevent forced liquidation.
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By understanding the nuances of perpetual versus delivery contracts and mastering margin selection and risk controls, traders can unlock new dimensions of opportunity—even in declining markets. With disciplined execution and proper education, contract trading becomes not just a speculative tool, but a strategic advantage.