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Trading

Order Types#

Market Orders#

The trader accepts the best available bid or offer price and the position will be matched instantly.

When you place a Market Order, it will automatically start at the best Buy/Bid or best Sell/Ask then automatically work it's way through the order book until the order is filled.

When you have a market order that is larger than the best Buy/Bid or Sell/Ask, the system will buy everything available at the best price. And instantly buy the next best price and so on until the order is filled.

Limit Orders#

The trader chooses the price they would like to get matched at.

When a trader chooses a price that is better than the current bid or ask, their order will enter the orderbook at wait to be matched. Conversely, If the trader chooses a price that is worse than the best bid or ask, their order will get matched immediately.

Terms#

To trade perpetuals on Kollider, a trader needs to be aware of the following terms:

Side/Direction#

Buy/Long

Sell/Short

Quantity#

The amount of contracts.

Mark Price#

The mark price is a mechanism that ensures the futures price stays in-line with the spot price during the trading day, protecting from market manipulation.

On Kollider, the mark price is a reference price derived from the Kollider indices. It is used to determine if a position will be liquidated or not.

Index Price#

The index price is a volume weighted average price from multiple spot exchanges, it represents the market consensus price of the underlying asset.

Margin#

In order to enter a position, 'collateral' is required. Kollider requires a trader to maintain a Bitcoin balance for an open position to act as collateral. This balance is a traders initial margin requirement.

Currently, margin is isolated for each position on Kollider. Meaning, the maximum loss for a position is limited only to the initial margin and additional margin added. Adding additional margin to a position on Kollider reduces leverage and changes a position to a more favourable liquidation price.

Leverage#

Leverage allows a trader to gain exposure to a position without a larger initial margin requirement (less capital is required upfront). Which allows a trader to magnify their gains, but also their losses.

When trading with leverage a trader makes profits or losses based on the notional value (notional value is the total value of the assets in a leveraged position).

Profits on the notional position size get added to the margin balance.

Losses get deducted from the margin balance.

Funding#

The price of a perpetual is pegged to the underlying price using a funding rate mechanism. This mechanism results in a fee traders will pay or receive if they hold a position open at funding timestamp.

  • On Kollider, the funding rate is the fee exchanged directly between buyers and sellers every hour.

If the perpetual swap is trading above the price of the underlying price:

  • The funding rate will be positive
  • Long traders will pay short traders. Disincentivising buying and incentivising selling, lowering the perpetual swap price to fall in line with the underlying asset.

If the perpetual swap trades below the price of the underlying price:

  • The funding rate will be negative
  • Short traders will pay long traders. Disincentivising selling and incentivising buying, raising the perpetual swap price to fall in line with the underlying asset.
Example:

Every hour the funding rate varies, meaning a trader with a Bitcoin perpetual position worth $1000 would pay or receive a funding fee of $0.25 if the funding rate was +/- 0.025%

0.025% * $1000 = $0.25

UPNL/RPNL#

UPNL: Unrealised Profit and Loss

RPNL: Realised Profit and Loss

UPNL Example: For a BTCUSD position, unrealised PNL is the difference between the average entry price and the mark price.

UPNL = quantity x (1/average entry - 1/Mark Price)

RPNL Example: For a BTCUSD position, realised PNL is the difference between the average entry price and the price of which the BTCUSD position was closed/sold at.

RPNL = quantity x (1/average entry - 1/close/sell price)

Liquidation#

Liquidation of a position occurs when the mark price hits the liquidation price, it is how Kollider ensures a trader never has negative equity.

A liquidation on a position will occur when the margin level of the position falls below its maintenance margin level, when this happens the initial margin for the position is lost.

  • When a position is liquidated, the position is closed, and its margin balance will be zero.