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What is Spot and Perps Trading?

In the cryptocurrency world, many people speculate on various financial products to earn profits. This can be achieved through two main types of trading: Spot trading and Perp trading.

Spot trading involves buying and selling assets to take advantage of their price changes, which means that when you take a spot position, you are actually buying and owning the asset. However, some traders wish to take more exposure with their available liquidity and also have instruments that allow them to build more advanced trading strategies such as hedging. This is where Perp trading comes in, introducing three innovative characteristics.

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Spot Trading on Amped

Amped’s spot trading leverages the ALP pool to provide:

  • Zero Price Impact: Trade any size without affecting the market price
  • Oracle-Based Pricing: Fair market prices determined by external oracles
  • Low Fees: Minimal swap fees compared to traditional DEXs
  • Deep Liquidity: Access to the entire ALP pool for your trades

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Synthetic Instruments

To understand perpetual trading, it is helpful to start with the concept of derivatives. Derivatives are financial contracts between two or more parties that derive their value from an underlying asset, such as stocks, commodities, or cryptocurrencies. This means that the value of the contract varies based on the fluctuation of the underlying asset value. Therefore, they are synthetic instruments that do not involve the exchange and physical or digital ownership of the underlying asset. They allow traders to have exposure to an asset without holding it.

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Leveraged Instrument

Unlike spot trading, Perp trading allows traders to take leverage on their position, meaning that traders can control a larger position with a smaller amount of capital. This is achieved by borrowing money from liquidity providers to increase the size of their position.

For example, if you have 1,000andwanttobuya1,000 and want to buy a 10,000 futures contract on ETH, you can use leverage to control a position worth 10,000withjust10,000 with just 1,000 of your own money. With leverage, if the market goes up by 10%, you can make a net profit of 1,000(insteadof1,000 (instead of 100 without leverage). But if the market goes down by 10%, you would lose $1,000, which is your entire investment (known as liquidation).

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Amped’s Leverage Features

  • Up to 10x Leverage: Trade with up to 10x your collateral
  • Isolated Margin: Each position is isolated to prevent cascade liquidations
  • Real-Time Risk Management: Continuous position monitoring via oracles
  • Transparent Liquidation: Clear liquidation thresholds and processes

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No Expiration Date

Perpetual contracts, unlike futures contracts or options, do not have an expiration or settlement date. This means that traders can hold them indefinitely as long as they maintain the required margin. This is the key difference between perps vs futures/options.

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Amped’s Trading Engine

Amped’s perpetual trading engine, inherited from GMX v1, provides:

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Advanced Order Types

  • Market orders for immediate execution
  • Limit orders for precise entry/exit points
  • Stop-loss and take-profit orders

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Risk Management

  • Automated liquidation to protect the pool
  • Funding rate mechanisms
  • Position size limits based on available liquidity

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Transparent Execution

  • All trades executed on-chain
  • No hidden fees or spreads
  • Clear profit/loss calculations

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Benefits of Trading on Amped

  1. Unified Liquidity: Both spot and perp trades tap into the same ALP pool
  2. No Slippage: Oracle pricing ensures consistent execution
  3. Low Fees: Competitive fee structure for both spot and leveraged trades
  4. Decentralized: Fully on-chain with no centralized components
  5. Multi-Chain: Trade on multiple networks with consistent experience

For more technical details about our trading architecture, refer to our Whitepaper.