Crypto futures trading is getting more traction as new players join the game. First off, it can be used as an additional tool that can help hedge your portfolio while you continue making the best out of your regular trading strategies. Secondly, futures trading in the crypto space enables you to benefit from any market state.
Just like with spot trading, it’s all about predicting the price of the coin. However, when trading bitcoin futures, you do not necessarily own the asset or deal with the intricacies of storing or selling your digital assets. In fact, you can open short positions for assets you don’t actually hold. Some people choose not to get into futures trading as it often seems advanced, but in reality, it is quite similar to your regular spot trading experience.
Trading Crypto Futures: The Basics
The mechanics of futures contracts is rather straightforward. Just imagine two traders, one of which wants to sell a coin at a particular price in the near future and the other agrees to buy it when a certain date comes. Thus, they enter an agreement hoping to profit off asset price fluctuations.
Moreover, futures trading allows for limiting negative price trends. Say you expect the price of an asset you hold will soon drastically decrease. In this case, you can create a futures contract to sell at a current price even if it changes later.
So how does one actually starts trading futures?
First, you need to pick a crypto exchange that supports futures trading; note that they are usually available in BTC and ETH. When deciding on the platform, make sure it is well-established and secure. Moreover, it should be easily accessible and easy to use. For instance, HitBTC provides the crypto futures trading tool on the web and via the HitBTC Android App.
Once you take your pick and make a deposit, you’ll need to make a proper trading plan and decide whether you go long or short. Analyzing the market trends will give you an idea about where the asset value goes. If you expect the price to go up, you go long. And the other way round – you go short when you forecast the dip.
Last but not least, when planning, it is important to determine the risks you’re willing to take with each trade and stick to them. If you’re not confident enough, it’s worth starting with a demo account and practicing before you go all in.
Just like any other type of trading, futures contracts come with a risk. Researching the market, using additional tools such as indicators and technical analysis, and establishing goals and risks for every trade can help mitigate the risks. Choosing a good broker is also crucial. A reputable exchange with virtual account functionality and reasonable fees allows its users to simplify and secure the entire trading process.
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