📖Trading Basics
On-chain Perpetual Future Contracts
When you trade on IntentX, you're entering into on-chain perpetual future contracts. Perpetual futures are a type of futures contract that doesn’t have an expiry date. Without an expiry date, there is no physical settlement of goods, so the purpose of a perpetual futures contract is to exchange risk on the price of an asset.
When a trader decides to close a position, a cash-settlement is carried out, depending on the difference in asset prices from when the trade was initiated to when it was closed. The leverage level, which is agreed upon beforehand, plays a role in determining this settlement amount.
Since these contracts don't expire, traders have the flexibility to maintain positions as long as they desire. However, it's essential to monitor underlying asset prices and funding rates continually, as profitability depends on these changes over time.
Collateral & Cross-Margin Account
Before trading on IntentX, users deposit a form of collateral (USDC) into a cross-margin account. This account is unique in its operation. Instead of managing each position's margin separately, all position margins are pooled together. This pooling method allows positive and negative unrealized profits to offset each other.
This cross-margin mechanism is an advanced risk management tool that provides traders with better liquidity and minimizes the chances of unwanted position liquidations. Yet, with increased flexibility comes increased responsibility. As trades are made with leverage, rapid market movements can cause significant changes in unrealized gains or losses, which can surpass the initial collateral amount.
As trades on IntentX involve leverage, it's possible for a party's unrealized losses to swiftly surpass the collateral they've deposited. The cross-margin feature mitigates some of this risk as margin can be utilized from all deposits/positions in the sub-account.
In a future update, isolated trade positions will be available to provide flexibility to traders. For now, traders can isolate positions by placing orders in distinct sub-accounts.
Funding Rates
Rather than settling the contract at a close date, perpetual futures markets use a system known as the funding model. Funding rates are recurring payments exchanged between traders and solvers maintaining perpetual contract positions. Due to the indefinite nature of these contracts, there's a potential for a price difference to develop between the perpetual contract's price and the spot price of the underlying cryptocurrency. Funding rates help maintain the perpetual contract's price to spot price ratio at 1:1.
If the funding rate is in the negative, those in short positions compensate those in long ones. Conversely, with a positive rate, those in long positions pay those in short.
Terms and Definitions:
Unrealized Profit and Loss (UPNL)
UPNL showcases potential gains or losses that would result if a trader closed their active position(s).
It's calculated by evaluating the difference in USD terms between the average entry price and the prevailing index price.
Open Interest (OI)
OI gives the total value of ongoing perpetual contracts held by traders. These are contracts that remain open and haven't been closed.
The OI is expressed as as current OI / available OI. If the current OI meets the total avaliable, new trades cannot be opened until existing positions are closed.
It serves as a measure for the market's overall activity.
Account Health
Represented as a percentage, it indicates the health of a trader's position.
When the Equity Balance matches the Maintenance Margin, you will risk liquidation.
Maintenance Margin (or CVA)
Considered the trader's "security deposit." If the equity balance (which combines account balance and UPNL) drops to this mark, liquidation is imminent.
This margin is locked and non-transferable, encompassing all open positions.
Equity Balance
A combination of a trader's dedicated account balance and UPNL, this metric indicates the probable future balance.
If it dips to the amount of the Maintenance Margin, liquidation ensues.
Allocated Balance
Represents funds assigned by traders for a specific Margin Sub-Account.
These funds can either initiate margin positions or be reverted to the Main Account after a defined Fraud Proof interval.
During the Fraud Proof window, third-party evaluators authenticate the balance's accuracy and legitimacy intended for withdrawal. If it's verified, withdrawal is then permitted.
Initial & Locked Margin
The Initial Margin feeds into the Locked Margin. The Locked Margin represents margins engaged across all live positions.
While part of a trader's Equity, the Locked Margin acts as a buffer, deterring excessive position openings.
Available for Orders
Denotes the account balance still accessible for Requests and Orders.
Withdrawal & Proof of Time
IntentX's design instantly finalizes all transactions. To counteract risks like double spending, a 12-hour fraud-proof phase is a necessity before withdrawing the original USDC deposit.
Consideration is currently underway for third-party integration that can expedite withdrawals.
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