Similar to options, futures are standardized contracts with a fixed price and expiration date that are entered into between two parties. The term comes from the fact that they are agreements to produce an underlying good at a specified time at a specific cost. Because the investor does not own the underlying product, futures are derivative. Instead, their value is derived from the price of an underlying asset. It might be a commodity, a financial instrument, or an index. This post will examine how to trade futures crypto in further detail to help you understand the subtleties.
Why should you look into futures trading in the first place?
Investors can profit from two main advantages of crypto futures. Hedging cost risk is the primary motivation for knowledgeable and institutional investors. They can use derivative contracts to lower their downside risk by holding a short futures position. Generating extra returns that cover the risk associated with owning spot assets like BTC and ETH will aid in loss mitigation.
Speculation about price direction is another typical explanation. Leveraged futures crypto trading allows investors to make significant bets on an asset, even up to 100x if they are sure.
Moreover, futures trading in cryptocurrencies provides greater chances for portfolio expansion. With the help of the leverage offered when trading futures, it is simple to multiply a portfolio by many in a single transaction.
How crypto futures trading works
A futures contract is an agreement between a buyer and a seller to deliver an asset at an established time and for a predetermined cost. It can also be the payment to the buyer of an amount equal to the futures contract’s expenditure on its expiration date. The buyer might readily sell their contract to another party even before it is finalized. The cost of contracts and the underlying asset are nearly similar. Yet, it can diverge from the underlying asset’s price, particularly during a strong bull or bear market. They often cost more than the underlying assets during a bull market. As a result, they frequently cost less during bad markets.
The purchase (long) or selling (short) of an underlying asset is the subject of a contract, which is a tradable contract. Buyers’ and sellers’ expectations of the underlying asset’s price performance are at odds. If the underlying asset’s value is higher at closing than at the beginning, the buyer makes a gross profit; if it is lower, the buyer makes a gross loss. When trading futures crypto, you expect that the value of the underlying asset will increase when you open a long position. Futures have a contract size in which each piece has a predetermined quantity of the underlying product as an asset, similar to many other derivatives.
How to predict price changes?
Like spot instruments, all standard technical analysis methods are also relevant to the future. However, it should be remembered that the underlying asset’s price constantly reflects predictions.
Plotting the contract curve by comparing price values for several periods is the most efficient way to forecast the movement of futures based on current value and futures crypto trading volumes.
A forecast is reasonably accurate when growth or decrease signals co-occur. In other situations, judgments can only be made in light of immediate possibilities.
The basic rule is that any study might be flawed if political considerations are not considered.
It is also essential to consider how to trade crypto futures and how assets are related. Exchange-traded funds, stocks, and cryptocurrencies become more affordable when inflation and the cost of commodities rise. Even though money is unique, it is constantly in demand during crises.
Where can I trade Bitcoin and crypto futures?
The markets for cryptocurrencies are online marketplaces where you may purchase or sell derivatives. While trading in incredibly unpredictable markets, traders frequently use them to protect other assets or realize profits.
A decent platform must at least fulfill the following requirements:
- Have a solid track record of accomplishments and favorable comments.
- Provide a wide range of contract options, a high degree of liquidity, and support all widely used trading pairs.
- Provide as many deposit and withdrawal options as feasible.
- Maintain users’ funds in cold wallets to protect them from hacker threats.
- Being as transparent as possible is beneficial if the project’s creators engage with users, respond to their inquiries, and often provide updates on the project’s progress.
Furthermore, the terms of the selected exchange must also be acceptable to you, including commissions and restrictions on trading and deposits and withdrawals of money.
Pros and cons of trading on crypto exchanges
There are advantages and disadvantages to trading on crypto exchanges. These are a few of the key pros:
- It is one of the best methods to manage risk in light of the rising volatility of the Bitcoin market.
- Cost fluctuations of at least a few percent daily are no exception.
- The capacity to take a long or short position and profit in various ways depending on the circumstances.
- Efficiency in cryptocurrency market speculating.
Investors purchase futures at a predetermined cost in anticipation of an increase in coin value. Contracts gain value when prices rise and may be sold to other traders at an excellent cost when they expire. Also, traders sell futures at a given price in expectation of declining prices. Contracts gain value when prices drop and are acquired by other investors for less money. In the end, each side triumphs.
It is also worth remembering the risks and disadvantages. For example, the loss can be greater than the investment, mainly if the margin trading method is used. Also, futures make the market even more volatile. To minimize risks, you must work out the ideal strategy and stick to it.
Crypto futures trading pairs available on WhiteBIT
The biggest cryptocurrency exchange in Europe is WhiteBIT, where you may practice this type of trading. The platform places a high premium on asset security. You can trust WhiteBIT with your assets. Another element of success for a professional investor is stable crypto futures trading for beginners. The exchange’s trading core is designed to handle a significant volume of transactions. You can collaborate with the biggest traders if the liquidity pool is large enough. You must first visit the “Futures” section of the menu to purchase them. The “Buy” tab must then be chosen. You should then decide on the order’s type, cryptocurrency to buy, quantity, and leverage. Following that, you may buy without risk!
To sell futures, the user must choose the required order parameters under the “Sell” page. The current financing rate and the time remaining until it is charged are listed in the top right corner of the page.
The platform’s first contract was USDT-M with the pair BTC-PERP. The combinations for Bitcoin and ripple crypto futures are shown below:
Moreover, WhiteBIT is one of the top three exchanges in dependability with the highest AAA grade in 2022, according to the audit and certification platform CER.live, and it complies with the strictest security standards.
Cryptocurrency futures are the most effective instruments for trading Bitcoin, ripple crypto, and well-liked altcoins. The contracts let you change in either direction and boost your money using leverage.
It is important to utilize such a tool properly since, in the process, the dangers present in traditional trading persist, and new ones also emerge, such as those related to leverage. Users also affirm that leverage is a particularly lucrative strategy that enables one successful transaction to co-occur. Depending on the exchange or broker you choose, there may be different regulations for trading these contracts.
Realizing that Bitcoin futures are always risky is crucial. Like any other investment strategy, the provided method has ups and downs. If the value of Bitcoin goes in the opposite direction of your position, you might lose more money than the margin you placed. If it goes as predicted, your income will exceed the down payment. Leverage usage also contributes. It instantly raises profitability to a level that is consistent with it.