fees

Zero Fees – A Mathematical No Brainer

With the Digitex Futures Exchange continuing to onboard more users and showing steady growth in volume and liquidity daily, it’s starting to become evident that it can thrive as the outlier of all Bitcoin Perpetual Futures Exchanges. Being the only place that traders can swap contracts with no fees lost to the house is such a powerful advantage for traders that soon, it won’t make sense to trade anywhere else.

Since Digitex opened its doors on the 27th of April, I have been lucky enough to be one of the early access participants and have had the opportunity to trade with no commissions. I do not consider myself to be a highly experienced trader. Before trading on the Digitex platform, my trading experience sums to perhaps 20 trades total using ByBit and Binance accounts, reading a book or two, and investing in the odd index fund. I barely broke even on my trades and decided the time investment was more than it was worth, so I stopped. 

But in just 15 days of trading on Digitex Futures, I turned my modest initial balance of 3,000 DGTX into 8,100 DGTX, corresponding to an increase in funds of 270%. Although a small balance, it’s a large relative gain and I believe was only achievable due to the potential that zero-fee trading presents to traders. 

Specifically, compounding funds that would otherwise have been spent on fees into growing your trading balance.

Compound Interest

Compound interest is possibly the most powerful financial tool on the planet. Warren Buffet attributes his investing success to this investment technique and Albert Einstein once described it as the 8th wonder of the world.

Compounding is the process of exponentially increasing the value of your investment by reinvesting any profits so that the capital on which you generate profits is continuously growing. As your capital is continuously growing, it generates larger profits which are then added to your capital to generate even larger profits. This is repeated enabling your investment to grow exponentially over the years. If you have no knowledge of compound interest, I highly recommend you spend some time learning about it.

Now, the reason this is important and relevant to the Digitex Futures Exchange, is because of the zero-fee model. Paying no commissions on trades opens up a whole new realm of possibilities when trading.

Keeping Fees vs Paying Fees

I believe the best way to emphasize this point is by playing out a scenario comparing the same trading movements on Digitex, Binance, BitMEX, and ByBit. In this scenario I will compound all profits into the trading balance and use the entire balance for the next trade. Fees will be considered and, for the sake of simplicity and emphasis, all fees will be taker fees at the rates of the respective exchanges. 

The analysis will assume the same trade repeated representing a 0.1% movement in Bitcoin. We are assuming no losing trades for the purposes of comparison.

Because Digitex has a zero-fee structure, this analysis is delving into the benefits of trading small gains, corresponding to two tick movements on the Digitex ladder. In each case, we are starting with an initial trading balance of $1,000. 

365 Trades

A trade a day keeps hunger away. The below comparison tables plots the same, small movement trade repeated 365 times. This could be a daily 2 tick trade or packed into whatever timeline your trading strategy dictates but what is immediately evident is that adding fees to your trading balance instead of losing fees to exchanges can significantly help grow your capital and increase your odds of success.

Zero Fees – A Mathematical No Brainer 1

Zero Fees – A Mathematical No Brainer 2

Both BitMex and ByBit see negative returns while Binance and Digitex Futures are positive. With a starting balance of $1,000, trading this strategy on the Digitex Futures platform would generate 3 times as much profit across 365 trades than its closest competitor.

3,650 Trades

Although across 365 trades, Binance looks like it competes with Digitex, I’m now about to present to you the power of compounding. Over time, small percentages compounded amount to extensive returns. Across 3650 trades, no other platform on the market can keep pace with the potential that Digitex offers its traders. Where both ByBit and BitMex have fed on over 80% of your capital, Digitex has helped you to nearly 40x returns.

Zero Fees – A Mathematical No Brainer 3

Zero Fees – A Mathematical No Brainer 4

10,000 Trades

The real power of compounding gets ludicrous at upper levels and you’d be lucky to be able to fill enough contracts to do this, but just for fun let’s look at 10,000 successful 0.1% trades. You’ll notice I had to put this on a logarithmic scale to see the other platforms’ performance compared to Digitex.

Enough said really.

Zero Fees – A Mathematical No Brainer 5

Zero Fees – A Mathematical No Brainer 6

Summary

Compounding your investments is a financial tool to facilitate exponential growth in your finances. In trading, compounding your trading balance can have the same effect. When compounding, small percentages amount to huge returns over time. What looks like small trading fees on exchanges such as ByBit, BitMex, and Binance can amount to lost opportunity when considered across a larger time frame.

Digitex Futures allows traders to not only operate but thrive within the margins where other platforms produce a loss due to high fees. If a trader can manage to compound these fees into their trades, they have a significantly higher chance of being successful.

Remember, exchanges aren’t built on winners, they’re built on fees.

Until now.

digitex futures

Beginners Guide to Digitex Futures Part 2 – What do All the Numbers Mean?

Last week, we started from the very basics with a guide to buying DGTX tokens for newcomers. In the next post in this series, we’re going to walk through the next steps, covering the essentials of futures trading. And perhaps one of the most daunting parts for newcomers – deciphering all those numbers and charts on the Digitex trading interface. 

With the launch of the Digitex Futures platform and the seamless integration of its first 70 traders, things are gearing up now as Digitex prepares to provide zero-commission trading to the masses of cryptocurrency enthusiasts across the planet. As trust in the traditional financial sectors continues to diminish, cryptocurrencies such as Bitcoin are becoming a favored path for investment amongst the general population. 

With the halvening over and stimulus cheques flowing into Bitcoin, swings in the price of Bitcoin has been a dream for traders and none more so than the lucky few who have access to the Digitex platform at this moment in time. 

Mark my words – the ease of entering and exiting positions using a single click ladder interface is going to set a new standard in this industry. Anyone who has traded on the platform thus far will attest to the value of this for reversing positions on the fly, turning your losing trades into instant winners. 

As much as I would like to delve into the exceptional advantages this exchange offers its users – that comes later. For now, I’d like to present the Digitex Futures Exchange to new traders and outline what all the different numbers they see on the platform actually mean. 

The Digitex Futures Exchange – Bitcoin Perpetual Futures

The first thing to understand is what you are actually trading. In this case, the product is Bitcoin Perpetual Futures contracts. You are essentially betting on the performance of Bitcoin (BTC) versus the U.S. Dollar (USD).

If you think BTC is going to rise in price versus USD then you can open a position of ‘LONG’ contracts. If you think BTC is going to drop in price versus USD then you can open a position of ‘SHORT’ contracts. 

If you open a long contract and BTC goes up in price you can close your position for a profit. If you sell a short contract and BTC goes down in price you can close your contract for a profit. 

However, if BTC goes the opposite direction to what you had bought, you can either close your contract and accept a loss or hold your contract and hope that the price comes back in your favor. If the price runs too far against you, your position can be liquidated, which is discussed in further detail below. When your position is liquidated, this means it is automatically closed for a loss by the exchange. 

So you are not trading actual Bitcoins, you are trading contracts that represent the performance of BTC versus USD.

On the Digitex platform, the currency used to open these contracts is the DGTX token. All contracts are bought using the DGTX token and all winnings and losses are transacted using the DGTX token.

Below is a snip showing the Exchange in action. At first glance, there is a lot going on. So let me break it down into sections. 

Beginners Guide to Digitex Futures Part 2 – What do All the Numbers Mean? 7

A – The Ladder

The ladder is where you open and close your trades. It is the order book and allows you to buy long or short contracts to speculate on the future price of Bitcoin. 

The ladder is comprised of several key components.

    1. Spot Price: The spot price is the current trading price of BTC versus USD on the Digitex Exchange. The spot price is ever-changing and moves up and down the ladder depending on the BTC trading price at that instant in time. The spot price separates long contracts from short contracts. If you buy below the spot price, on the left (green) side of the ladder you are opening a long contract and are hoping that BTC will go up in value from there. Similarly, if you buy above the spot price, on the right (red) side of the ladder you are opening a short contract and are hoping that BTC will go down in value.

 

    1. Bitcoin Price Column: The Bitcoin Price Column is the vertical line of prices in white writing running from the bottom to the top of the ladder in $5 increments. Each of these $5 increments is called a ‘tick’.

 

    1. Entrance Price: Once you buy some contracts, the ladder will now show your entrance price. In the above image I have opened a short position at $8822.55 which is shown by the red line coming out from the ladder price. If I had opened a long at this price this would be green and not red.

 

    1. Profits: When you open a position, the ladder will display profits and losses along the side. This is great as it lets you know an estimate of how many DGTX you will make or lose if you close your contracts at this price. In the above example, you can see that the spot price is in the green, meaning, if I close my position, I will make an estimated profit of 23DGTX for that trade. This is a four-tick trade as the price of BTC has changed by four ticks from where I entered. Remember, a tick is each $5 increment of the BTC price.

 

    1. Orders: Orders from both yourself and other traders can be seen on the ladder. The rows of numbers beside each BTC price (in red and green) are orders placed by other traders who would like to either buy or sell contracts at those specific Bitcoin prices. In the above image you can see that there are two white numbers ‘25’ in the rightmost column of the ladder. These are my orders, specifically my short orders. To make these orders I simply click on the order book beside the BTC price – so I click where other people’s orders are and join the queue.

 

  1. Totals: What I call totals can be seen at the top of the ladder. In this image there are a total of 2384 long contracts and a total of 3395 short contracts currently placed on order in the ladder. 50 of these are mine. These numbers are important as they give you a feel for how much liquidity the ladder has while you’re trading. Essentially, it represents the total number of contracts people are trading at that moment in time and it tells you the balance of long and shorts currently on the exchange.

 

B – Your Trading Position Information

The box highlighted and annotated with the letter ‘B’ shows the position that your trading account is currently in. It has five important pieces of information:

  1. Bal: This is the total balance of DGTX tokens that you have in your trading account.
  1. ABal: This is the available balance of DGTX tokens that you can use to place more trades. If you have open trades, like I do in the above image, then your available balance will be less than your total balance by the number of DGTX you currently have open in trades.
  1. UPnL: This is your Unrealized Profit and Loss. This value will match the profit/loss value on the ladder at the location of the spot price when you have an open position. If you have no open position this will be blank.
  1. PnL: This is your Profit and Loss that has been realized after you have opened and closed a trade. Currently, this resets every 8 hours and it gives you a way to track your performance for your trading sessions.
  1. Open Contracts: The large number in the middle of them all is your total number of currently open contracts. If this is green, you have open longs. If this is red, like mine above, you have open shorts.  

C – Leverage, Liquidation & Margin

At the top, annotated by the letter C, is where you adjust your leverage. If you don’t know what leverage is, you should research it before trading.

To understand leverage you must first know what liquidation and margin are. If you open a contract and the market moves in the opposite way than you had predicted, you risk liquidation. Liquidation is the event where the platform will close your open position at a certain agreed price. This price is based on your chosen leverage. The higher the leverage you trade with, the closer your liquidation price is to your opening position price.

When you increase your leverage, you are decreasing the amount of margin that each contract costs you to buy. Margin is your stake per contract and with no leverage applied it is equal to the contract value seen in box E. Margin is the amount of DGTX that is taken from your Available Balance when you open a contract on the ladder.

The equation for margin is easy, simply divide the contract value by the leverage you choose.

So, as you see from this, higher leverage reduces your margin for each contract. This allows you to trade more contracts with your trading balance, increasing your buying power.

An example:

Your Total Balance is 2000 DGTX. The Contract Value is 200 DGTX.

  •   At Leverage x1, you can buy 10 contracts total.
  •   At Leverage x10, you can buy 100 contracts total.

This sounds amazing but remember, the trade-off is a closer liquidation price and higher risk. Newcomers should proceed with caution and build up their use of leverage based on experience. 

D – Contract Sizes

This section of the platform allows you to adjust your default contract sizes, simply click to cog symbol, and edit the contract sizes to suit your trading strategy and balance.

E – Background Mechanics and Funding

I’m not sure what this section is called but I call it the background mechanics. This shows you:

  1. Contract Value: As we described, this is the value of each contract. The contract value is dependent on the price of Bitcoin and is denominated in DGTX. It is the amount of DGTX that each contract is worth. You can convert this to USD by multiplying the contract value by the price of each DGTX token.
  1. Tick Value: The tick value is how many DGTX you make or lose for every tick (Remember a tick is a $5 movement of the spot price). This, multiplied by the amount of contracts you open, will be what dictates the Profit and Loss Numbers that you see beside the ladder when you open a long or short.
  1. Funding, Payout, In: When the ‘IN’ counter reaches zero, people with open long contracts will pay the percentage seen next to ‘Funding’ (0.01%)  to those with open short contracts. So, if you are holding a long-term long position you must factor this into your strategy.

Summary

I hope this article has given a good breakdown of the Digitex Futures Exchange and what each of the different numbers means. The best way to learn and understand is to get onto the platform and start trading for yourself. It’s not as complicated as it looks! If you just want to practice, check out the testnet where you can trade with play tokens to get a hang of the platform.