Perpetual Futures on Arbitrum: A Simple Guide

Perpetual futures are a popular way to trade crypto. They let you bet on whether a price will go up or down. You can do this without actually owning the crypto. This guide will show you how to use them on Arbitrum, a popular blockchain network.

What Are Perpetual Futures?

Think of perpetual futures like a bet that never expires. Unlike regular futures contracts, they don’t have a set delivery date. This means you can hold your position for as long as you want.

Traders use them to:

• Speculate on price movements.
• Hedge their existing crypto holdings. This means protecting against potential losses.

Why Trade on Arbitrum?

Arbitrum is a Layer 2 (L2) scaling solution for Ethereum. It makes transactions much faster and cheaper than on the main Ethereum network. This is great for futures trading, where you might make many trades quickly.

Arbitrum uses technologies like ZK-Rollups to achieve this speed and cost reduction. To learn more about how these work, check out our guide on ZK-Rollups.

How to Trade Perpetual Futures on Arbitrum

You’ll need a few things to get started:

1. A Crypto Wallet: Like MetaMask or Trust Wallet. Make sure it’s set up for the Arbitrum network. You can learn more about wallets in our guide on Self-Sovereign Wallets.
2. ETH on Arbitrum: You need Ether (ETH) on the Arbitrum network to pay for transaction fees (gas) and to use as collateral. You can bridge ETH from Ethereum to Arbitrum or buy it directly on an Arbitrum-based decentralized exchange (DEX).
3. A Decentralized Exchange (DEX) that offers Perpetual Futures: Popular options on Arbitrum include GMX and Kwenta.

Steps to Trade:

1. Connect Your Wallet: Go to the DEX’s website and connect your crypto wallet.
2. Deposit Collateral: You’ll need to deposit some ETH or stablecoins (like USDC) into the DEX’s smart contract to use as collateral. This is what you’ll risk if your trade goes against you.
3. Open a Position: Choose the asset you want to trade (e.g., BTC, ETH). Decide if you want to go ‘long’ (betting the price will rise) or ‘short’ (betting the price will fall). Select your use.
4. Set use: use lets you trade with more money than you actually have. For example, 10x use means you control $1000 worth of crypto with only $100 of your own money. This can multiply your profits but also your losses.
5. Place Your Order: Enter the amount you want to trade and confirm the transaction in your wallet.
6. Monitor Your Position: Keep an eye on your trade. If the market moves against you too much, your collateral could be liquidated.
7. Close Your Position: When you want to exit, simply place an order to close your position. Your profits or losses will be settled based on the difference.

Risks to Consider

Trading perpetual futures is risky. You can lose all of your collateral quickly, especially when using high use. Liquidation is a key risk. This happens when your losses become so large that your collateral can no longer cover them, and the exchange automatically closes your position.

Always start with small amounts and understand the risks involved before trading.