Explanation of notional value, cost value and quantity unit in contract transactions

Perpetual Contracts are a special type of contract. Unlike traditional futures contracts, they have no expiration date and allow traders to open and close positions at any time. In perpetual contracts, quantity units, cost value, and nominal value are three key concepts, which respectively involve the size of the contract, the trader's cost, and the value of the contract. Ubit provides nominal value, cost value, and quantity units as order units. The following is a detailed explanation of these three concepts:

Nominal Value

Definition: Notional value refers to the contract size or value of a perpetual contract, expressed in USDT, to represent the market value of your position.

Purpose: Notional value is used to calculate the value of your position in the contract, as well as your profit and loss. It represents the value of the contract you control, but does not involve leverage or margin.

Example: Assume that you place an order for 1000 USDT in a BTCUSDT perpetual contract with a nominal value, a leverage of 10X, and a price of 10,000 USDT. Without considering the handling fee, your cost is the nominal value / leverage = 1000 / 10 = 100 USDT; your order quantity is the nominal value / price = 1000 / 10000 = 0.1

Cost Value

Definition: Cost value refers to the amount of cost you invest when opening a perpetual contract, including initial margin and transaction fees. It represents the actual cost you invest in the transaction.

Purpose: Cost value is used to assess the risk and cost you actually take on a trade. It helps you determine your transaction costs and margin requirements.

Example: Assume that you place an order for 1000 USDT in a BTCUSDT perpetual contract with cost value as the unit, leverage ratio of 10X, price of 10000 USDT. Without considering the handling fee, your order quantity is cost value * leverage ratio / price = 1000 * 10 / 10000 = 1

Quantity Unit

Definition: The quantity unit is the quantity of the underlying asset you place an order to buy or sell in a perpetual contract, and is the basic unit in the trading system.

Purpose: The quantity unit determines the size of each order you place, as well as the amount of margin required for the transaction. It can help you control the size of your position and thus manage risk.

Example: Assume that you place an order in BTCUSDT perpetual contract with quantity unit, leverage 10X, price 10000USDT, and without considering the handling fee, your cost is quantity * price / leverage = 1 * 10000 / 10 = 1000 USDT; your nominal (order) value is quantity * price = 1 * 10000 = 10000 USDT.

A few things to note:

1. The notional value is the size of the contract, the cost value is the capital you actually invest, and the quantity unit is the amount of the underlying asset you place each time.

2. The cost value usually includes initial margin and opening transaction fees.

3. Using leverage can increase the size of your position, but it also increases the value of your costs and potential risk of profit and loss.

4. Before trading perpetual contracts, it is important to understand the exchange's rules and fee structure in order to effectively manage risk and costs and make informed trading decisions. Finally, please note that perpetual contract trading is high risk and may result in capital loss. Before trading this type of contract, it is recommended that you fully understand the relevant knowledge, develop a risk management strategy, and trade with caution.