The Ultimate Guide to Trading on Huobi Futures

I. Huobi Futures User Interface

1. In this area, you can also find links to other Huobi pages, including Coin Margin, API, Copy Trading and Spot Trading.

2. This is where you can:

  • Choose the contract by hovering over the current contract’s name (BTCUSDT by default).
  • Check the expected Funding Rate and a countdown until the next funding round.
  • See your current chart. You can switch between the Original or the integrated Trading View chart. You’ll get a real-time display of the current order book depth by clicking on [Depth].

3. This is where you can monitor your own trading activity. You can switch between the tabs to check the current status of your positions and your currently open and previously executed orders. You can also get a trading and transaction history for a given period.

4.  Monitor real-time order book data. This module displays real-time transaction information. In addition, we can also check the index price in real-time (the liquidation will be based on the index price, so please pay attention to it).

5. This is the order entry field. Please see below for a detailed description of the types of orders offered. Here, it is also possible to switch between cross and isolated modes. Click the current leverage multiple to adjust the leverage.

6. You can check available assets, deposit and buy more cryptocurrencies here, and you can also view information about current trading and position information here. Please pay attention to the margin ratio to avoid forced liquidation.


II. How to Adjust Leverage

Huobi Futures trading allows manual adjustment of leverage for each trade. When selecting a trading pair, you can move the mouse to the upper left corner of the page and hover over the current contract category (The default trading pair is BTC / USDT).

To adjust your leverage, go to the order entry module and click on the current leverage. Adjust the slider to set the leverage ratio, and then click [Open Long/Open Short].

It is worth noting that the larger the position, the less leverage you can use. Conversely, the smaller the position, the greater the leverage that can be used.

In addition, higher leverage will bring higher forced liquidation risk. So new traders should carefully consider the leverage to avoid forced liquidation.


III. Difference between index price and latest price

In order to against price fluctuation and unnecessary liquidations during periods of high volatility, Huobi futures trading introduces [Last Price] and [Mark Price].

The latest price is easy to understand; it represents the latest transaction price. In other words, the price of the most recent transaction in the transaction history is the [Latest Price]. It is used to calculate your realized profit and loss.

[Mark Price]is to avoid price manipulation. It combines funding data with a basket of spot transaction data in its calculations. The liquidation price and future profit and loss will be calculated based on the index price and Basis of Bid and Ask Middle Price.

Note that the index price and the latest price may be different.


IV. Type of order and how to use it

There are several order types that can be used in Huobi contracts:

1. Limit Order

A limit order is an order that you place on the order book with a specific limit price. When you place a limit order, the trade will only be executed if the market price reaches your limit price (or better). Therefore, you may use limit orders to buy at a lower price or to sell at a higher price than the current market price.

2. Market order

A market order is an order to buy or sell at the current price. When a market order is settled, you will pay fees as a market taker.

3. Stop Limit Order

The easiest way to understand a stop-limit order is to break it down into stop price, and limit price. The stop price is simply the price that triggers the limit order, and the limit price is the price of the limit order that is triggered. This means that once your stop price has been reached, your limit order will be immediately placed on the order book.

Although the stop and limit prices can be the same, this is not a requirement. In fact, it would be safer for you to set the stop price (trigger price) a bit higher than the limit price for sell orders, or a bit lower than the limit price for buy orders. This increases the chances of your limit order getting filled after the stop price is reached.

4. Stop Market Order

Similar to a stop-limit order, a stop market order uses a stop price as a trigger. However, when the stop price is reached, it triggers a market order instead.

5. Take-profit limit Order

If you understand what a stop-limit order is, you will easily understand what a take-profit limit order is. Similar to a stop-limit order, it involves a trigger price, the price that triggers the order, and a limit price, the price of the limit order that is then added to the order book. The key difference between a stop-limit order and a take-profit limit order is that a take-profit limit order can only be used to reduce open positions.

A take-profit limit order can be a useful tool to manage risk and lock in profit at specified price levels. It can also be used in conjunction with other order types, such as stop-limit orders, allowing you to have more control over your positions.

Please note that these are not OCO orders. For example, if your stop-limit order is hit while you also have an active take-profit limit order, the take-profit limit order remains active until you manually cancel it.

You can set a take-profit limit order under the Stop Limit option in the order entry field.

6. Take Profit Market Order

Similar to a take-profit limit order, a take-profit market order uses a stop price as a trigger. However, when the stop price is reached, it triggers a market order instead.

You can set a take-profit market order under the Stop Market option in the order entry field.

7. Trailing Stop Order

A trailing stop order helps you lock in profits while limiting the potential losses on your open positions. For a long position, this means that the trailing stop will move up with the price if the price goes up. However, if the price moves down, the trailing stop stops moving. If the price moves a specific percentage (called the Callback Rate) in the other direction, a sell order is issued. The same is true for a short position, but the other way round. The trailing stop moves down with the market but stops moving if the market starts going up. If the price moves a specific percentage in the other direction, a buy order is issued.

The Activation Price is the price that triggers the trailing stop order. If you don’t specify the Activation Price, this will default to the current Last Price or Mark Price. You can set which price it should use as a trigger at the bottom of the order entry field.

The Callback Rate is what determines the percentage amount the trailing stop will “trail” the price. So, if you set the Callback Rate to 1%, the trailing stop will keep following the price from a 1% distance if the trade is going in your direction. If the price moves more than 1% in the opposite direction of your trade, a buy or sell order is issued (depending on the direction of your trade).


V. How to use Hedge Mode

In Hedge Mode, you can hold both long and short positions at the same time for a single contract. Why would you want to do that? Well, let’s say you’re bullish on the price of Bitcoin in the longer term, so you have a long position open. At the same time, you may want to take quick short positions on lower time frames. Hedge Mode allows you to do just that – in this case, your quick short positions won’t affect your long position.

The default position mode is One-Way Mode. This means that you can’t open both long and short positions at the same time for a single contract. If you tried to do it, the positions would cancel each other out. So, if you want to use Hedge Mode, you’ll need to enable it manually. Here’s how you do that.

You cannot adjust the position mode after opening it.


VI. What is the funding rate and how to check it

The Funding Rate makes sure that the price of a perpetual futures contract stays as close to the underlying asset’s (spot) price as possible. Essentially, traders are paying each other depending on their open positions. What dictates which side gets paid is determined by the difference between the perpetual futures price and the spot price.

When the Funding Rate is positive, longs pay shorts. When the Funding Rate is negative, shorts pay longs.

This means that depending on the funding rate and your open positions, you end up either on the side paying or on the side receiving it. On the Huobi contract trading platform, funds are paid every 8 hours. You can check the time and the estimated Funding Rate at the top of the page, next to Mark Price.


VII. What are Post-Only, Time in Force, and Reduce-Only?

When using limit orders, you can place additional orders at the same time as the order is posted. In Huobi futures, limit orders can choose three effective mechanisms, "Post only"," A fill or kill order (FOK) ","An immediate or the cancel order (IOC) ".

1. Post only

Orders will not be immediately executed in the market, thus ensuring the trader remains a maker. If the order immediately matches an existing order in the market, the post-only order will be canceled.

2. IOC

It is an order to be executed immediately with any unfilled portions canceled.

3. FOK

Order to either fill the entire order immediately or to cancel the order details.

When you are in one-way position mode, choosing [Reduce-Only] will ensure that new orders you set will only decrease, and never increase your currently open positions.


VIII. When are your positions at risk of getting liquidated?

If the margin balance falls below the required bar, your position will be liquidated. Margin balance includes unrealized profit and loss. That is, your profit or loss will cause a change in the margin balance. If using the cross-position mode, the balance will be used as the margin for all positions. If using the isolated position mode, the balance can be allocated to each position.

【Maintenance Margin】represents the minimum margin required to maintain a position. The amount depends on the size of the open interest. The larger the position, the more maintenance margin is required.

Please keep an eye on the current margin ratio to avoid forced liquidation.

When the liquidation occurs, all your orders will be canceled. The most reasonable action is tracking your position, to avoid additional fees of liquidation. If your position is likely to be liquidated, please manually close it to avoid expansion of losses.


IX. Summarize

A futures contract is a derivative contract where traders oblige to buy or sell an asset in the future. However, unlike traditional futures contracts, perpetual futures contracts do not have a certain delivery date. Derivatives are a bit difficult to understand for newcomers. Therefore, it is important to understand how these contracts work before taking risks to avoid losing real money risk.