Navigating the Intricate Realm of Crypto Futures
Prepare yourself for a turbulent journey as we venture into the intricate realm of crypto Futures, a potent instrument for securing improved deals on your assets. Futures have been a staple in traditional finance for decades, but they are not native to the crypto sphere. To put it simply, Futures involve procuring a contract to purchase or vend an asset at a later date, usually with the aid of a broker who advances you cash.
Here’s how it functions: you purchase contracts for a predetermined amount of an asset, such as bitcoin, with a particular level of leverage. The higher the leverage, the more hazardous the contract becomes. Suppose you procure a contract for one bitcoin with 2x leverage, the broker — let’s say, Binance — will advance you another bitcoin. This permits you to magnify your gains exponentially.
The Risks of Leverage Trading on Binance Futures
However, there’s a caveat. Binance has the prerogative to “liquidate” your contract if they presume it’s too precarious. For example, if you purchase a futures contract for one bitcoin with 5x leverage that expires in three months, and the price of bitcoin is $20,000, Binance will lend you four bitcoins. If the price of bitcoin surges to $30,000 when the contract expires, you will earn a lot more money than if you simply purchased one bitcoin.
Nonetheless, if the price of bitcoin plummets to $15,000 within a month, Binance may opt to liquidate the contract, leaving you with a loss of $20,000 — your entire investment. If you had merely invested that $20,000 into bitcoin, your loss would have been restricted to $5,000. Binance offers up to 125x leverage, which is incredibly audacious even for the crypto market.
Trading Crypto Futures
Futures are widely perceived as risky, and it’s imperative to have knowledge and experience before delving into them. Binance offers two types of futures: perpetual or quarterly contracts settled in cryptocurrency or BUSD/USDT stablecoins. This implies that if you purchase a bitcoin futures contract, you will be remunerated in bitcoin or stablecoins when the contract expires.
To trade futures on Binance, you must establish an account and finance it through a bank transfer. Once you possess a funded account, you can elect the futures you desire to trade by clicking on the derivatives tab. Here, you can choose the type of futures contract, the settlement, the leverage amount, the number of contracts you want to procure, and execute the trade.
Trading and Order Options
The derivatives tab also provides a plethora of information about the market, encompassing price charts, 24-hour volume, 24-hour high and low, and market depth. You can also execute a range of trades on Binance futures, such as limit orders, market orders, stop limit orders, stop market orders, trailing stop orders, take profit orders, and post only orders.
A trailing stop order is akin to a stop limit order, but instead of a firm number to execute a trade, it’s a number in proximity to the market price that “trails” the current price. A take profit order, conversely, is the antithesis of a stop limit order. It is established at a price higher than the market price to execute if the price reaches that level, ensuring the trader realizes a profit on the initial trade.
Post Only Orders for Reduced Fees and Rebates
Lastly, a post only order is fashioned to only execute if the order can be placed in the order book and is immediately canceled otherwise. These are employed to guarantee a market-maker rebate and lessen trading fees.