How Perps Trading Works
How perps trading works on Vordex
Vordex is a decentralized perpetual exchange that allows traders to open leveraged positions using collateral from the Loan Pool.
Unlike traditional spot trading, perpetual trading on Vordex enables users to:
✔️ Trade with leverage – Increase market exposure using borrowed funds. ✔️ Long or Short assets – Profit from both rising and falling markets. ✔️ Manually manage positions – Since automated TP/SL orders are not supported, traders must actively monitor their trades.
1. Position management
Long Positions
A long position profits when the price of the asset increases.
✔️ Traders deposit collateral (only ALPH). ✔️ Additional funds are borrowed from the Loan Pool to increase position size. ✔️ Profits are paid in the longed asset upon closing the position.
🔹 Example:
You open a long ALPH-USDT position at $2.50.
If ALPH rises to $3.50, you profit from the price increase.
Short Positions
A short position profits when the price of the asset decreases.
✔️ Traders deposit collateral (only ALPH). ✔️ Additional funds are borrowed to sell the asset at the current market price. ✔️ Profits are paid in the stablecoin collateral when closing the position.
🔹 Example:
You open a short ALPH-USDT position at $3.50.
If ALPH drops to $2.50, you profit from the price decline.
2. Managing collateral and liquidation risk
Traders can adjust their collateral to manage margin requirements and avoid liquidation.
✔️ Adding collateral → Reduces liquidation risk by increasing margin. ✔️ Withdrawing collateral → Increases liquidation risk by lowering margin.
📌 Liquidation Price Calculation:
Longs → Liquidation occurs if ALPH price drops below the liquidation price.
Shorts → Liquidation occurs if ALPH price rises above the liquidation price.
⚠️ Leverage amplifies risk → Regularly monitor your liquidation price and adjust collateral as needed.
3. Manual position management (No TP/SL Orders)
On Vordex, Take-Profit (TP) and Stop-Loss (SL) orders cannot be automated due to the limitations of RALPH, the Alephium smart contract language.
✔️ Traders must actively monitor the market and manually close positions to lock in profits or limit losses.
📌 Example of Manual Position Management:
You open a long ALPH at $2.50.
If your target price is $3.50, you must manually close your position when ALPH reaches this level.
If the price drops and you want to limit losses, you need to exit manually before liquidation.
⚠️ Since Vordex does not support automated TP/SL orders, it is essential to track your trades regularly and react quickly to market movements.
4. Fees and Costs on Vordex Perps
When you trade on Vordex, four types of fees apply. Here’s what to expect:
1️⃣ Transaction Fees (Gas) → You’ll pay standard on-chain gas fees required to execute trades on the Alephium blockchain.
2️⃣ Liquidity Provider Fee → A fixed 0.3% fee is applied on each trade. 💡 This fee is distributed to liquidity providers for supporting trading activity.
3️⃣ Opening/Closing Fee → A 0.06% fee is applied based on your position size. 💡 This applies when opening or closing a position on the perpetual markets.
4️⃣ Borrow Fee → Charged hourly on borrowed funds used to open leveraged positions. 💰 The rate is dynamic and depends on the Loan Pool utilization at the time of borrowing.
📌 Example Borrow Fee Calculation
Position Size: $10,000
Hourly Borrow Rate: 0.0034%
Hourly Cost: $10,000 × 0.0034% = $0.34
Daily Cost: $0.34 × 24 = $8.16
These fees ensure fair compensation for liquidity providers and maintain the sustainability of the Vordex perpetual trading model.
5. Risk Management and Liquidation
To ensure the long-term sustainability of the protocol and fairly compensate liquidity providers, positions on Vordex are automatically liquidated when the trader’s loss reaches -75% of their initial collateral.
Why Liquidate at -75%?
✔️ To protect the Loan Pool from bad debt and ensure it remains solvent. ✔️ To allow recovery of the borrowed funds plus interest. ✔️ To reward Loan Pool contributors by using the remaining 25% of the collateral to cover interest and maintain yield.
When Does Liquidation Occur?
✔️ When the position’s unrealized PnL reaches -75% of the collateral. ✔️ When the asset price hits the liquidation threshold, based on leverage and market conditions. ✔️ When the collateral is no longer sufficient to maintain the minimum margin requirements.
📌 Example Liquidation:
You open a $10,000 long position using $1,000 in collateral (10x leverage). If ALPH drops by 7.5%, your unrealized PnL is -75%, and the position is liquidated. The remaining 25% of your collateral is retained by the protocol to repay the borrowed amount and interest to liquidity providers.
⚠️ Mitigating Liquidation Risk
✔️ Use lower leverage → Reduces liquidation exposure. ✔️ Monitor your liquidation price → Add more collateral if needed. ✔️ Close trades manually → Vordex does not support automatic take-profit or stop-loss orders. Traders must actively manage open positions.
This system maintains a fair and efficient trading environment, protecting both traders and the Loan Pool while incentivizing healthy liquidity participation.
6. Example trade
🔹 Scenario: Opening a 5x Long on ALPH
You deposit $500 in ALPH as collateral.
You apply 5x leverage, borrowing additional $2,000 in ALPH from the Loan Pool.
Your total position size = $2,500.
You enter at $2.50 ALPH price.
📌 Profit Calculation:
If ALPH rises 10% → Your position value increases by $250.
After borrow fees & closing fees, you keep $230 profit.
📌 Liquidation Calculation:
If ALPH drops to $2.00, your position gets liquidated.
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