Cryptocurrency futures strategy

Cryptocurrency futures strategy

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Futures are considered the most popular instrument in trading on the crypto market. Futures trading strategies on Binance and other platforms are similar to trading strategies for stocks, currencies and other assets, but have a number of features.

What is cryptocurrency futures trading?

It is worth understanding what futures trading are before moving on to the strategy of cryptocurrency futures in trading. It differs from spot, does not involve the purchase or sale of cryptocurrencies directly. A trader buys or sells a contract, which specifies the value of the asset and the date on which the terms of the contract must be met.

Futures contracts allow traders to speculate on the future price of an asset in the cryptocurrency market. For example, you can go long if you bet on an increase in value, or go short if you expect the price to go down.

Why is trading with futures strategies on Binance and other exchanges attractive for traders:

  • opportunity to speculate on the course;
  • high chance of increasing the investment portfolio due to the use of leverage in trading;
  • hedging, portfolio protection.

One of the main advantages is trading with leverage. It allows the trader to open trades for high amounts that he does not actually own. Leverage increases the possible profit, along with this; it increases the risks in case of a trade failure.

Speculative futures trading

The strategy for trading cryptocurrencies in the futures market is to buy an asset cheaper and sell it higher. Trading using futures contracts allows you to conduct transactions with high profitability without having a large deposit at the start. Only the margin amount is needed, and leverage is used to obtain it to buy or sell a futures contract.

What you need to use Binance futures trading strategies:

1. Register a futures trading account on the exchange. The user must pass two-phase authentication to fund Binance Futures balance and trade.

2. Deposit funds in any cryptocurrency available on the site. The exchange supports the trading of a large number of digital assets.

3. Select a suitable futures contract. The user can select two types of Bitcoin contracts, USDS-M and COIN-M on this site.

4. Select the leverage for the contract.

5. Select an order. Beginning traders can use a limit order or a market order.

Other cryptocurrency futures trading strategies: hedging, arbitrage, futures spreads

Cryptocurrency futures strategies are used not only to make money, but also to reduce risks. Investments in digital assets are risky, as the volatility of the cryptocurrency market is high.

An investor can use forward futures to insure against a fall in the price of an asset and save capital. It is one of the effective hedging tools. The principle is as follows: losses in one market are covered by income in another. Hedging is the creation of an order in the futures market opposite to an order in the spot market.

Arbitrage transactions in the cryptocurrency market are several positions on the same or related assets. The trader makes a profit in the form of the difference in the cost of the crypt in the futures market and the spot market, or in the form of the difference in the price of futures with different deadlines for fulfilling the conditions.

A trader needs to buy the underlying asset on the spot market, open a short position on the futures market, and put the asset on the futures contact to implement the strategy.

A trader can simultaneously open long and short trades on futures contracts to use spreads. This may be buying and selling a futures contract for the same coin, but with different dates for the completion of the contract.

Trading futures contracts is quite complex and a novice trader will have to learn it. You can learn the necessary skills on the Crypto Crew course. Our mentors will tell you more about futures strategies on Binance and other popular trading platforms, and teach you how to trade safely and profitably.