THELOGICALINDIAN - A stepbystep adviser to trading abiding affairs on dYdXs Layer 2 platform
Crypto Briefing explains how to use dYdX, one of the fastest-growing platforms for decentralized perpetuals trading on the Ethereum blockchain.
An Introduction to Perpetual Trading on dYdX
Since ablution in 2018, dYdX has become the better perpetual trading belvedere for crypto assets.
The boilerplate circadian transaction aggregate of dYdX surged to about $10 billion in September 2024, before that of decentralized trading platforms and centralized exchanges like Coinbase.
Introduced by the centralized barter BitMex, perpetuals, contrarily accepted as “perps”, are a blazon of acquired that acquiesce traders to accretion continued or abbreviate acknowledgment to a assertive crypto asset. Perpetuals action agnate to futures contracts, alone they never expire according to a schedule.
dYdX is powered by the Ethereum Layer 2 band-aid StarkWare. Although it additionally offers derivatives trading on Layer 1, it will move to alone Layer 2 from November 2021.
Since dYdX is a decentralized exchange, users are not appropriate to complete Know Your Customer (KYC) procedures like they are with best centralized exchanges. All you charge is a adjourned crypto wallet and you can alpha trading in a amount of minutes.
dYdX uses the aforementioned order book system begin on centralized exchanges. It additionally enables avant-garde adjustment types. It is non-custodial, which agency that traders absorb admission to their funds at all times via an Ethereum wallet.
This beginner’s adviser capacity the step-by-step action for traders attractive to alpha trading on-chain perpetuals.
Connect MetaMask Wallet and Generate Stark Key
Start by appointment funds from Ethereum mainnet to StarkWare.
Go to the official dYdX website and bang on “Connect Wallet” on the top left-hand ancillary of the page. A pop-up will again arise allurement you to affix with an Ethereum wallet, such as MetaMask, Ledger, Wallet Connect, or imToken.
For this tutorial, Crypto Briefing acclimated the best accepted Ethereum wallet, MetaMask.
After abutting your wallet, a pop-up will allure you to accomplish a Stark Key (see the screenshot above). The Stark Key helps analyze a user’s annual and creates a defended alternation amid Layer 1 and Layer 2.
There is no advancement of the Stark Key—it gets adored on the Web browser. Click on “Generate Stark Key” to accomplish a Signature Request. Assurance the transaction—there is no gas fee to sign.
User Onboarding
After auspiciously creating a Stark Key, dYdX will ask you to accede the acknowledged terms. Click on “I agree” to proceed. Note that dYdX restricts admission to U.S users.
After accordant to the terms, dYdX asks you to actualize an annual with an alternative username and email address. To assurance up after abacus a username or email address, skip and bang on “Create account.” A popup will again arise in your wallet to appeal a wallet signature. Signing this appeal gives admission to access dYdX.
Deposit USDC
To activate trading on dYdX, you charge drop funds from Ethereum mainnet. Currently, the belvedere alone accepts the stablecoin USD Coin (USDC) as trading collateral. Top up your wallet with USDC if you do not accept any funds.
When you add USDC to dYdX for the aboriginal time, you charge accredit spending through your wallet. This allows dYdX to absorb USDC from the wallet with the project’s acute contract. Approving the transaction requires advantageous a gas fee in ETH.
After enabling USDC for spending, drop the bulk of USDC you would like to barter with. This transaction additionally requires advantageous a gas fee. USDC should again arise on your trading account. At that point, you can alpha trading.
Start Perpetual Trading
To alpha trading, arch to the “Trade” tab and baddest a crypto asset that you appetite to trade. Besides Bitcoin and Ethereum, dYdX allows abiding trading for several above crypto assets. In this guide, Crypto Briefing demonstrates how to booty a continued position on Polygon’s MATIC token. Click on the asset, in this case MATIC, to accessible the trading window.
The funds you deposited appearance up as “Equity” in the trading interface. In the screenshot above, the Equity deposited from Ethereum mainnet is $9.92.
Deciding how abundant advantage to use is one of the best important accomplish of abiding trading. Advantage is the bulk of funds you borrow from the belvedere to accomplish a trade. It serves as a multiplier on assets or losses.
dYdX allows up to 10x advantage trading. With $9.92 as Equity, the belvedere gives a best Buying Power of $99.20. Note that application 10x advantage can aftereffect in liquidation if the asset makes a 10% move in the adverse administration of your trade.
To abstain ample losses of adopted capital, dYdX liquidates your position afterwards a assertive threshold. Before you access the trade, the belvedere automatically calculates the defalcation amount of a position.
Going Leveraged Long
Scroll on the advantage slider according to your adopted accident level. Crypto Briefing best aloof beneath 2.5x advantage to abate the accident of liquidation.
Select “Place bazaar order.” In the archetype pictured, the bulk of advantage and disinterestedness amounts to an allocation of $24.66 afterwards accounting for a bacteria fee.
$24.66 affairs ability equates to a position admeasurement of 19 MATIC tokens at an basis amount of $1.30 per MATIC.
The Liquidation Amount shows on the basal right-hand ancillary of the page. In this example, the amount is $0.82 per MATIC.
As the barter was a bazaar order, it was anon filled. The “Portfolio” tab shows all accessible positions, in this case continued 19 MATIC with 2.49x leverage.
Note: You can additionally abode a absolute adjustment to buy or advertise a accustomed asset at a defined price. You can apprentice added about the assorted Perpetual adjustment types on dYdX here.
Closing a Position With Limit Orders
To abutting a position, you can actualize a absolute adjustment that sells the tokens at a defined absolute price.
To do this, go to the “Trade” tab and abode a limit order to advertise the asset, in this case 19 MATIC. Select a Limit Price. In the archetype above, Crypto Briefing selects a amount of $1.80 per MATIC.
The belvedere will automatically access the aforementioned advantage acclimated in the above-mentioned buy order.
In the archetype above, the barter will assassinate if the amount alcove $1.80. This would beggarly the position is awash at $34.20, abrogation a accumulation of $9.54.
As the barter is alone accomplished if the amount crosses the absolute amount of $1.80, the MATIC position will abide open. You can additionally avenue an accessible position at any time by manually beat on “Close Position” at the basal of the Barter tab.
Placing a Stop Loss
Risk administration is acute in crypto trading, abnormally back application leverage. If you are captivation a continued position, agreement a stop accident adjustment aloft the defalcation amount is an able way to administer risk.
dYdX additionally lets you actualize stop accident orders to abbreviate basic accident from bazaar volatility. This agency that if the amount of the asset falls, the position will abutting afore the belvedere can cash it.
You can abode a abbreviate advertise afterwards selecting “Stop” beneath the Trade tab. In the archetype above, Crypto Briefing selects a stop amount of $1.20, 7.6% beneath the aboriginal access price.
Click on “Place stop order.” If the amount drops to $1.20, the position will be awash and the barter will close.
Derivatives trading is advised actual chancy and is not recommended for beginners. However, for those attractive to barter perpetuals on crypto assets in a arguable manner, dYdX’s Layer 2 barter ability be the best abode to get started. With abysmal liquidity, a ambit of accurate assets, and low gas fees acknowledgment to StarkWare’s technology, dYdX has created a derivatives belvedere that rivals the best accustomed centralized exchanges.
Disclosure: At the time of writing, the columnist of this affection endemic DYDX, ETH, and MATIC.
