What is Special About Cryptocurrency Futures Trading?
Cryptocurrency futures trading is not a new financial instrument because it has been used for a hundred of years. Futures are applicable for such valuable goods as precious metals, grains, gas, oil, etc. Now, this type of trading is also appropriate to the crypto market. Photo by David McBee: https://www.pexels.com/photo/round-silver-and-gold-coins-730564/ The essence of this financial instrument is agreements made between traders. A contract includes the future value of a coin and the day when the traders owe to fulfill their commitments. And it doesn’t matter where the market moves. That is a peculiarity of this trading method – you need to be able to foresee the future coin price movement and bet on it. In simple terms, crypto futures work as follows: You research the market and make a forecast for the coins value, suppose, in two months. If you believe it will grow, you enter into a long trading position and oblige to sell assets. If you think the price should fall, you claim that you will buy coins. Traders fulfill their obligations on the day stated in the agreement. When opening a crypto futures contract, you may use borrowed money from an exchange you use. For example, if [...]
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Cryptocurrency futures trading is not a new financial instrument because it has been used for a hundred of years. Futures are applicable for such valuable goods as precious metals, grains, gas, oil, etc. Now, this type of trading is also appropriate to the crypto market.
Photo by David McBee: https://www.pexels.com/photo/round-silver-and-gold-coins-730564/
The essence of this financial instrument is agreements made between traders. A contract includes the future value of a coin and the day when the traders owe to fulfill their commitments. And it doesn’t matter where the market moves. That is a peculiarity of this trading method – you need to be able to foresee the future coin price movement and bet on it.
In simple terms, crypto futures work as follows:
- You research the market and make a forecast for the coins value, suppose, in two months.
- If you believe it will grow, you enter into a long trading position and oblige to sell assets.
- If you think the price should fall, you claim that you will buy coins.
Traders fulfill their obligations on the day stated in the agreement. When opening a crypto futures contract, you may use borrowed money from an exchange you use. For example, if you do not have enough money. In that case, you may multiply your initial amount by 10, 20, 30, etc. times and appear to have a much better initial position and, therefore, much higher income if your price forecast is correct. Be cautious with using borrowed funds, for if the market moves in the opposite direction, your position in the deal will be liquidated.
What Asset to Pick?
Choosing a coin for cryptocurrency futures, pay attention to those coins with the biggest market cap and trade volume, which means the asset is in demand and trades with it are conducted often. For example, it may be Bitcoin, Solana, Cardano, or Ethereum.
Where to Practice Crypto Futures Trading?
Pick crypto exchanges that are:
- Reliable and have a good reputation
- Provides High liquidity
- Offers large size of leverage
- Allows practicing on a demo account.
The WhiteBIT platform complies with all the listed criteria. Using demo tokens, you can try different leverage (borrowed funds) and see how your position changes in both positive and negative scenarios. Check out the WhiteBIT blog to learn more about crypto futures trading.
