6 Proven Crypto Perpetual Futures Trading Strategies – Complete Guide

To grow as a crypto perpetual trader, developing a personal trading strategy is vital. The top crypto trading strategies for perpetuals futures include known setups that can generate profit for traders. These strategies utilize trader experience and technical analysis to generate profits for traders. 

If you are getting into crypto perps trading and looking for the most prevalent strategies, this article discusses some of the best methods used by perps traders and risk-management strategies to prevent losses.

Top Crypto Perpetuals Trading Strategies

The top crypto trading strategies for perpetual futures include the following; 

1. Directional trading

Here, traders take a long or short position on an asset and hold their position for a long time. Long position bets on an uptrend (pump) while short positions bet on a downtrend (dump). As perpetual contracts do not expire, traders can hold on to this position while the market fluctuates, provided they furnish the position to avoid liquidation.

To run a successful directional trade, traders combine on-chain metrics (exchange flows, stablecoin inflows), macro trend (Fed policy, dollar strength), and technical analysis (200-week MA, monthly candles). Risk management strategies like monitoring funding rates, setting stop losses, and using small leverage (2-5X) are also advised.

2. Scalping

The scalping strategy utilizes short-term shifts in the value of an asset. Trades shortly open and close positions to capture small percentage profits (0.1-5%). To maximize profits, scalpers often use high leverage (50-200X) to boost their exposure per trade.

Scalpers exploit micro and short-lived trends like order-book liquidity gaps, fleeting funding rate dislocations, momentum bursts after large spot buys, or exchange-specific price deviations. While scalping is mentally exhausting and requires constant screen time, it remains one of the most consistent ways to extract money daily (in volatile markets) when done systematically. 

3. Swing Trading

Swing trading is another popular perpetual trading strategy and a considerably profitable tactic. Swing trader exploits mid-term volatility in the value of crypto assets. Swing traders take a directional position (long or short) and hold on to their position for 2-14 days to capture mid-term movements.

Swing traders rely heavily on technical analysis (trend channels, Fibonacci retracements, moving average crossovers, RSI divergences, etc) combined with catalysts specific to the project (upgrades, listings, macro data).

4. Arbitrage (Basis) Trading

The Arbitrage trading strategy exploits the difference between the Perps and spot price of the concerned asset, on the same trading platform. For instance, when perpetuals trade at a premium (positive funding), you short the perpetual and buy the same amount of asset on spot (on the same platform)

To successfully run a Perps arbitrage strategy, a trader must be able to execute trades fast to capture the changing prices, have significant capital to make funding meaningful, and hold spot securely.

5. Breakout Trading

Breakout trading exploits the vigorous and often rapid movement that occurs when the price of an asset breaks major support or resistance levels. For instance, when the price of an asset breaks a resistance, traders may take a long position in expectation of a further significant uptrend. 

Breakout traders also follow other trends like an asset real new all-time highs, or reaching round numbers (like hitting $1 for the first time).

6. Hedging

Heding is a sort of risk-management strategy that utilizes leverage trading and spot trading. Traders can take a short position on assets they hold on spot as a way of minimizing losses from a major speculative move. For instance, before the outcome of a major lawsuit is announced or before a major unlock, you can short a portion of your spot bag via perpetuals.

Also Read – List of Top Perpetual Futures DEXs

How to Avoid Liquidation While Using a Perpetual Futures Trading Strategy?

Alongside a profitable trading strategy, risk management strategies are also vital to your success as a perpetual trader. Here are some strategies to avoid or minimize liquidation while trading crypto perps;

1. Avoid Emotional Trading

Base your perps strategies on technical analysis instead of personal conviction. While the latter could work, technical analysis provides a non-diluted overview of the market using trading data. It is advisable to use this alongside project fundamentals while trading.

2. Endeavour to Use Stop-loss

Stop losses automatically close your position at set price levels to prevent increased losses. This is an important feature while trading crypto perpetuals. Set a reasonable stop loss, preferably below your risk-tolerance levels.

3. Close Leverage Monitoring

Leverage amplifies your position; higher gains for a winning trade also mean higher losses for a losing trade. It is therefore important that you closely monitor your leverage. Preferably, use reasonable leverage (2-5X) while trading. Use any available tool on your trading platform to keep an eye on your leverage and liquidation levels.

4. Monitor Funding Rates

Funding fees can impact your gains and losses significantly. It is important to monitor which side of the contract is paying the other and the fee you pay per interval. Estimate the fees required to maintain your position (if you are on the paying side) as part of the total cost of holding your position. Note that your position can be liquidated if your funds are insufficient to cover your funding fees.  

5. Risk Hedging with Diversification

A judiciously diversified position is a good way to hedge your risks while trading crypto perps. This can constitute a combination of spot and perp positions. Diversification spreads your risk; it is relatively safer than a single, overleveraged position. 

With a diversified position, your losses in a losing trade can be minimized or evened out by gains from a winning trade. A good strategy is hedging your perpetual position with a spot position. For instance, you can short an asset on Perps and purchase the asset on spot. This reduces your losses if the asset moves in any direction.

Conclusion

Leverage trading is an interesting trading system in crypto. Unlike spot trading, it involves lots of other factors that a trader must manage to be successful. In this article, we explore several strategies you can use to boost your profits as a leverage trader and also reduce losses. 

For trading environments as risky as perps, it is important to consider risk-management strategies alongside profit-making strategies. Review the strategies discussed in this article and select ones that work best for you. 

It is also important to regularly review your strategies against a changing market. Modify your strategies and explore better risk management strategies. Avoiding liquidation while trading perpetual contracts is important.