Perpetual contracts are one of the most popular derivative products in the cryptocurrency market. This guide explores the features of MEXC Exchange’s perpetual contracts, including trading fees, funding rates, auto-deleveraging mechanisms, and more.
Understanding Perpetual Contracts on MEXC
Perpetual contracts are similar to traditional futures but without an expiration date. This means traders can hold positions indefinitely, provided they avoid liquidation. MEXC offers both USDT-margined and coin-margined perpetual contracts, with a wide range of trading pairs categorized by themes like Solana ecosystem, Coinbase listings, and privacy-focused assets.
Key Advantages of MEXC for Contract Trading
MEXC stands out in the contract trading space for three main reasons:
- Diverse Range of Cryptocurrencies: MEXC supports over 800 perpetual contract pairs, offering more choices than most platforms.
- Rapid Listing of New Coins: The exchange quickly lists new tokens, sometimes even同步上线IEO tokens from other exchanges.
- Strong Security Record: Since its founding in 2018, MEXC has maintained a clean security history with no major breaches.
How Perpetual Contracts Differ from Traditional Futures
| Feature | Perpetual Contracts | Traditional Futures |
|---|---|---|
| Leverage | Up to 125x | Usually up to 50x |
| Margin Source | Collateral | Collateral |
| Settlement | None | Fixed expiration date |
| Regulation | Crypto exchanges | Licensed futures exchanges |
| Financing | Funding rate mechanism | Not applicable |
Perpetual contracts use a funding rate mechanism to keep their price aligned with the spot market. This fee is periodically exchanged between long and short traders to balance the market.
Step-by-Step Guide to Trading Perpetual Contracts on MEXC
Before trading, ensure you have registered an account and deposited funds. Then, follow these steps:
- Navigate to the "Derivatives" section on the homepage and select "Contract Trading".
- Choose your desired contract type and trading pair.
- Configure your trade settings:
Position Mode: Isolated vs. Cross Margin
- Isolated Margin: Only the collateral allocated to a specific position is at risk. Recommended for beginners.
- Cross Margin: All assets in your contract account serve as collateral for all positions, reducing liquidation risk but increasing potential losses.
Leverage Selection
MEXC offers leverage from 1x to 125x. Beginners should start with lower leverage (e.g., 5x or less) to manage risk.
Order Types: Limit vs. Market Orders
- Limit Order: Execute trades only at a specified price or better.
- Market Order: Execute immediately at the current market price.
Trigger Price vs. Last Price
- Last Price: The most recent transaction price for the contract.
- Trigger Price: The price at which a conditional order becomes active.
After configuring these parameters, enter your trade size and execute a long or short order.
Auto-Deleveraging (ADL) Mechanism
If a position is liquidated and the insurance fund cannot cover the loss, MEXC’s auto-deleveraging system steps in. ADL closes opposing positions based on profitability and leverage, starting with the most profitable traders. The ADL indicator灯号 shows your position’s priority in the ADL queue, with more lights indicating higher risk of being deleveraged.
Funding Rates Explained
Funding rates ensure perpetual contract prices stay close to spot prices. When the contract price deviates, funding fees are paid from one side of the market to the other. On MEXC, funding rates are typically calculated every 8 hours, though this can vary by exchange.
Insurance Fund
MEXC maintains an insurance fund to cover losses from liquidations that exceed collateral. The fund grows when liquidated orders are closed at prices better than the bankruptcy price. The insurance fund balance is updated every four hours and is visible in the contract information section.
Index Price Sources
MEXC uses a weighted average from major exchanges—including Bitstamp, Coinbase, and Kraken—to calculate index prices. If an exchange’s data deviates significantly or experiences delays, it may be temporarily excluded from the calculation.
Trading Fees
MEXC charges 0.02% for makers and 0.06% for takers on perpetual contract trades.
Risk Management and Best Practices
Perpetual contracts involve significant risk, especially with high leverage. Beginners should:
- Start with small positions and low leverage.
- Focus on major cryptocurrencies like BTC or ETH, which are less volatile.
- Use stop-loss orders to limit potential losses.
- Consider using MEXC’s demo account to practice.
Advanced traders can use perpetual contracts to hedge positions in other investments, such as DeFi liquidity pools, though this requires careful risk management due to volatility.
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Frequently Asked Questions
What is a perpetual contract?
A perpetual contract is a derivative product that allows traders to speculate on cryptocurrency prices without an expiration date. It uses a funding rate mechanism to align with spot prices.
How does leverage work on MEXC?
Leverage allows traders to open larger positions with less capital. MEXC offers up to 125x leverage, but higher leverage increases both potential profits and risks.
What is the difference between isolated and cross margin?
Isolated margin limits risk to the collateral allocated to a single trade. Cross margin uses all available funds in your account as collateral, reducing liquidation risk but increasing exposure.
How are funding rates calculated?
Funding rates are periodic payments between long and short traders based on the difference between perpetual contract prices and spot prices. Rates are typically updated every 8 hours.
What happens if I get liquidated?
If your position’s losses exceed your collateral, it will be liquidated. The insurance fund covers excess losses, but if insufficient, the ADL mechanism may close opposing positions.
Can I practice trading without risk?
Yes, MEXC offers a demo account where you can simulate perpetual contract trading with virtual funds.
Conclusion
MEXC’s perpetual contracts offer flexibility and a wide range of trading options, making them suitable for both beginners and experienced traders. However, due to the high risks involved, it’s essential to start cautiously, use risk management tools, and continuously educate yourself about market dynamics.