Derivatives are financial instruments based on an underlying asset like cryptocurrency. They allow traders to speculate on price movements without owning the asset. Main types on DEXs include futures, perpetual swaps, and options.

Leverage lets you open positions larger than your capital, for example, 10x. On a DEX, required margin and liquidation levels are automatically enforced by smart contracts.

Forced closure of a position by the protocol or smart contracts when margin falls below the required level. It occurs at market price and may lead to additional losses.

Trading derivatives on a DEX reduces counterparty risk, offers transparency through smart contracts, and allows profit from both rising and falling markets, though tools may be more limited than on a CEX.

Use stop-losses if the protocol supports them, manage position size carefully, and choose leverage according to your experience. Diversification across positions or assets can help, and for large trades, consider liquidity and potential slippage, since hedging options may be limited or unavailable.