Trading futures is a new exciting way to make money in crypto. It is simply a way to trade the future price of cryptocurrencies. Cryptocurrency futures are financial instruments and a form of agreement that permits traders to buy bitcoin or altcoin or rather sell the asset on a specific date for a set price. Crypto future traders predict the trend of an asset’s value. As a futures trader, you can either go long or short on an asset. This decision must be based on your analysis and prediction. You go long when you predict that the value of an asset is likely to go up and go short when you predict that the price of an asset is likely to dip.
When trading futures, you don’t actually own or buy the asset you are trading. Crypto futures give you the chance to profit from the volatility and price movement of a coin without actually owning the coin.
For instance, assuming an asset is trading at $100. A trader predicting an increase in price looks to go long and buys 10 futures contracts. This brings the value to $1000. If the trader’s prediction is right and the price of the asset rises to $200, the total value of the 10 contracts will now be worth $2000. This implies that the trader has made a gain of $1900.
Alternatively, if he predicts that the value of the asset will decrease and he takes a short position by selling 10 futures contracts at $100 with a total position of $1000. If he’s right and the value goes as predicted to $50, and he buys the 10 futures back at $500, he would have made a gain of $400.
Futures Trade Contracts Explained
Futures are described as legitimate agreements to buy bitcoin and other coins or sell bitcoin and other digital assets at a forecasted price in the nearest future. For instance, if two traders or investors have an interest in BTC, one of the investors pledges to sell the BTC at an agreed value, and the other investors promise to purchase it at the agreed date. These cryptocurrency futures contracts permit speculators to predict and gain from changes in the value of an asset.
Investors can utilize this to limit the negative price trends. For instance, if you have 1 BTC and you are concerned that the value may decrease, you can create a futures contract that permits you the legal rights to sell at present values even if the values change later. This would shield you in case of a price crash.
Trading futures and making gains
Crypto futures trading can be very risky, with most traders looking to use leverage to increase profit. It needs a lot of market review and analysis.
The following are steps on how you can make gains when you trade futures;
Learn how futures work
Unlike stocks, futures contracts do not work the same way, therefore, if you are new to it, it is best you understand how futures contract trade and what it requires. For those who are just starting, BTC futures require a very large margin.
The required maintenance margin of CME for BTC futures is thirty-seven percent of the value of the futures contract and the starting border for a hedger is a hundred percent of the maintenance border. Besides, speculators have a margin of 110% of the maintenance margin.
Also, note that the margin needs explained above are that of the CME, higher margin requirements might be seen on FCM which is dependent on the trade and the investor. Other factors include how close the values of the future trail the spot value, the liquidity in the trade, and how other investors and trade makers are positioned.
Create a Trading Plan
Creating and executing a trading plan is the most essential thing to do to advance your trading experience. Make sure your trading plan is based on a conservative review of the market you plan to trade.
When you create your trading plan, take into consideration your goals for every trade, the amount of risks you wish to take on a trade, and the amount of risks that are acceptable for every trade.
Also, take into consideration factors such as the technical and basic assessment indicators you intend to utilize to get signals for trading, the kinds of orders you intend on using, and the method you intend to use to monitor the trade and price movements.
Get a Broker
Getting a pro and accomplished company as your crypto futures contract broker will play a major role in your trading success. There are a lot of brokers to choose from, you should select the broker that you feel is best for you.
Start Trading
After selecting a broker, you can begin trading. It is advisable to start trading using a demo account to test your trade strategies. Using a virtual account to trade first gives you the opportunity to test your trading plans without committing any funds.
After you have successfully traded using your demo account, you can now add money to your account and begin trading BTC futures.
Also, note that to make profits when trading futures, it is advisable you start small and monitor the rate of your margin. For instance, if you have 1 BTC in your account, you shouldn’t trade the entire BTC at a time. Proper risk management is key.
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