Trailing Take Profit
A tool that allows an order to follow the best price and automatically close a position when it pulls back by a set amount. Such orders are provided by many exchanges and offer flexibility in fixing profits. When working with trailing take profits, it is important to understand three key concepts:
For example, consider specific parameters: Activation Price: 3% from the entry point; Number of orders: 1 (the bot does not allow using more than one order when working with trailing TP); Retracement: 1%.
When the activation price is reached, the order is enabled, and the trigger price comes into play, which is calculated as the difference between the asset's best price and the retracement amount. Accordingly, if the best price rises, the trigger price will also rise following it.
For example, with the given settings, when opening a position at 100 USDT, the order is activated upon reaching a price of 103 USDT, after which a trigger price of 102 USDT will be calculated. If the price continues to go up, the trigger price moves up along with it.
If the price reverses and goes in the opposite direction, in this case it reaches the trigger price, where a market or limit stop order is automatically placed (the bot uses a market order). A market order will trigger in any case, while a limit order might not be "caught" if the coin's movements are too volatile.
What does the retracement amount affect? The larger the retracement, the greater the deviation from the best price when the trigger price is reached, thereby reducing our profit. On the other hand, we give the order more room for a repeated upward reversal and, accordingly, an increase in profit.
Open Interest
A parameter used in derivatives trading (futures and options) to measure the total volume of open long and short contracts that have not yet been closed, exercised, or expired. It is needed for:
- Market activity analysis: Helps evaluate how actively market participants are trading a given instrument.
- Trend identification: An increase in open interest can indicate that the current trend is gaining strength, while its decrease may indicate a weakening of the trend.
- Liquidity assessment: High open interest indicates high liquidity, which makes it easier to enter and exit positions without significant price fluctuations.
Entry Point
entry point, position opening point, at this level the PNL for the position will be 0.
PNL (P&L, PnL)
profit and loss. Total profit or loss. In the context of cryptocurrency, this often refers to the current income or loss on a position.
Funding
Funding Rate is a mechanism used to align the price of a perpetual contract (USDT Perpetuals) with the price of the underlying asset. If the rate is positive, long position holders pay short position holders (making it "unprofitable" to buy contracts and keep a long position open); if the rate is negative, the opposite occurs. It is charged on the entire(!) position size, with settlements typically occurring every 8 hours. On highly volatile assets, this interval may be reduced to 4, 2, or even 1 hour. Analyzing funding rate spreads can also be a method for arbitrage.
I’d like to highlight a potential danger related to funding rates that has become particularly relevant lately. Some unscrupulous creators of various advanced "DeFi 3rd layer" coins have found a way to squeeze massive amounts of money out of retail traders using exchange mechanisms. The scheme is quite interesting: a coin gets listed after supposedly passing the exchange's due diligence, which typically includes verifying the distribution of the coin's supply across multiple wallets. In reality, this "multitude of wallets" is owned and controlled by a single beneficiary. Exchanges are often aware of this concentration but turn a blind eye due to the massive trading fees generated by the upcoming abnormal volume.
Only a small amount of coins is initially moved to the exchange, after which artificial hype is created through wash trading by other controlled accounts. You could do the same: create your own coin, list it for $1 million, and buy it from yourself at that price. Just like that, your coin has a fixed price of $1 million, and anyone "crazy" enough to short it is already facing losses.
This is where funding comes into play. The exchange sees that the spot price is significantly higher than the futures price - since everyone is aggressively shorting the futures. To align the spot and index prices, the exchange reduces the funding interval from 8 hours down to as little as 1 hour. The maximum funding rate cap can reach 2.5%. Meanwhile, the market maker opens a massive number of long positions and begins pumping the spot price, slowly trickling coins into the market.
New traders keep entering short positions on futures, only to find themselves trapped: their positions are in the red, and while they wait for the price to drop, a massive funding fee is deducted from their account EVERY HOUR. Moreover, as mentioned before, the rate is charged based on the current position size. Even if you opened a position with $20 and the coin grew 10x, the funding will be calculated based on $200. At a 2% funding rate, your entire position will be wiped out in just 5 hours.
This state of affairs usually lasts for several days, during which the market maker rakes in hundreds of millions of dollars simply from hourly funding payments. During this period, the coin's price swings by hundreds of percent, attracting new shorters during dips and allowing for the gradual distribution of coins to spot buyers. Once the bulk of the coins is distributed and price manipulation becomes difficult, the cycle ends with a massive "green candle" - a final short squeeze where hundreds of traders are liquidated, providing the exit liquidity for the market maker to close their longs. The advice here is simple: never short unknown coins, even if you think you’ve caught the absolute top. You know nothing about the market maker, their plans, the actual distribution of the supply, or many other critical details. This is an unjustified risk to your entire deposit.
