How does an exchange determine what price a coin is on a short or long future 20x order..if the shown price is 1 and u e x execute a long limit order 1 ... and you make exact limit short for 1 and the shown price is .99 but u try to sell your long but it's showing .95 for the price on the long and 1.05 on the short both being negative... how is this legal and how to approach exchange about any wrongdoings u felt were cause to make trading strategy o trading

Answered at Oct 20, 2024

Understanding Futures Trading and Price Discrepancies on Exchanges

Introduction

Cryptocurrency futures trading can be complex, especially when dealing with leverage and price discrepancies. This report will explore how exchanges determine prices for futures contracts, why discrepancies might occur, and how to address potential issues with exchanges.

How Exchanges Determine Prices

Exchanges use a combination of market data and algorithms to determine the price of a cryptocurrency. Here’s how it typically works:

  • Order Book Dynamics: The price you see on an exchange is often the last traded price or the best bid/ask price from the order book. The order book lists all buy and sell orders, and prices fluctuate based on supply and demand.

  • Index Price: For futures, exchanges might use an index price, which is an average of prices from several major exchanges. This helps prevent manipulation and provides a fair market value.

  • Mark Price: This is used to prevent unfair liquidations. It’s a calculated price that considers the index price and a decaying funding rate.

Understanding Price Discrepancies

When you place a long or short order, you might notice discrepancies between the expected and actual execution prices. Here are some reasons why:

  • Market Volatility: Cryptocurrency markets are highly volatile. Prices can change rapidly, leading to differences between the price you see and the execution price.

  • Slippage: This occurs when there’s a difference between the expected price of a trade and the price at which it is executed. It’s common in fast-moving markets.

  • Spread: The difference between the bid (buy) and ask (sell) prices can lead to discrepancies. A wide spread can cause your order to execute at a less favorable price.

Addressing Issues with Exchanges

If you believe there’s wrongdoing or an error, here’s how to approach the exchange:

  1. Document Everything: Keep records of all transactions, including screenshots and order IDs. This documentation will be crucial when discussing issues with the exchange.

  2. Contact Support: Reach out to the exchange’s customer support. Provide them with detailed information about the issue, including your documentation.

  3. Review Terms and Conditions: Understand the exchange’s policies on order execution and price determination. This can help you determine if the discrepancy is within their stated terms.

  4. Escalate if Necessary: If the issue isn’t resolved, consider escalating it. This might involve contacting regulatory bodies or seeking legal advice.

Conclusion

Price discrepancies in futures trading can be frustrating, but understanding the mechanisms behind price determination can help. By documenting issues and communicating effectively with exchanges, traders can address potential problems and ensure fair trading practices. Always stay informed and proactive in managing your trades.