Crypto Futures Trading
Crypto futures markets are continuously growing and gaining more popularity, contributing billions of dollars in trading volumes daily.
Bitcoin and other altcoins are volatile in nature. Many traders attempt to manage their risk simply by buying an asset when the price drops or selling it when the price goes up. A key benefit of futures trading is that you can hedge existing spot positions without additional crypto — allowing you to be agile and prepared for any market environment.
Trading through futures offers several advantages over spot trading, namely the ability to both long or short and get access to leverage.
What is Futures?
Futures is a contractual agreement between two parties to buy or sell any underlying asset at a predetermined future date and price. The futures contract derives its value from the underlying cryptocurrency.
Trading futures is more like an alternative to actually buying or selling the underlying crypto (aka spot trading). In spot trading, you can make a profit by buying Bitcoin low and selling it at a high price. This trade however works only in a bull market, i.e. when Bitcoin price is going up. However, in a bear market, there is no trade possible in spot trading. Furthermore, leverage trading is not possible in spot trading.
- More Liquidity
- Speculate on Market Direction — Long or short
- Hedge Price Risk
- No wallet required
Different Order Types
Market Orders: Market orders are considered the most basic order type. It is essentially an order to buy or sell at the best current price. For these orders, you have to enter the order quantity.
Limit Orders: These are the orders in which you place trades on the Order Book with a specific price you want to get your trade to execute. When you place the Limit order, the trades can be executed only if the market price reaches the limit price which you set.
Stop-Loss Orders: A stop order also referred to as a stop-loss order, is a trade order designed to limit (and therefore protect) an investor’s loss on a position. A stop order sells a stock when it reaches a certain price.
For example, you enter a short position in bitcoin futures at a price of $53000 and have set the stop-loss order at a price of $53800, since your position is short the stop order would be set higher than the entry price.
So, if the bitcoin futures price goes above $53800, you will be stopped out of the short position and thus limiting your loss.
Take Profit Order: A take-profit order is a type of limit order that specifies the exact price at which to close out an open position for a profit.
Most traders use take-profit orders in conjunction with stop-loss orders to manage their open positions. If the security rises to the take-profit point, the order is executed and the position is closed for gain. If the security falls to the stop-loss point, the order is executed and the position is closed for a loss.
Trailing Stop Order: Trailing stop orders makes sure that you gain maximum profits while minimizing the risk of losses that you might suffer in your current position. When you open a long position, the trailing stop goes up with a price rise. But, if the price goes down, the trailing stop ceases moving. If the price moves a certain percentage, a sell order is placed automatically. And, it is vice-versa for a short position.
Tips for Crypto Traders
1.) Build a Trade Plan
The basics of crypto futures contracts are pretty easy to understand. Developing and implementing a trading plan could be the most important thing you do to before doing futures trading.
While developing your trading plan, consider what your objectives are for each trade, the amount of risk you plan to take on a single trade, and how much risk is acceptable for each trade.
2.) Learn Technical Analysis Basics
Technical analysis uses price data to identify patterns and trends in crypto coins, enabling you to anticipate the future trajectory of a given digital asset.
If you wish to use technical analysis to find the right time to buy or sell it’s important that you gain a solid grounding in the different types of data display, as well as becoming familiar with fundamental technical analysis concepts, and indicators. Beginning to understand candlesticks is a good start.
3.) Study the Fundamentals
In order to prepare for trading properly, you should know and understand the key components of the market, you need to know everything you can about the company and the project behind a coin.
Be sure to understand smart contracts, blockchain-based tokens (like ERC20 and ERC223), and the different wallet systems, you can find the content in the Antier blog section.
4.) Check Cryptocurrency News and Community handles.
Another tip for trading bitcoin is to keep a finger on the pulse of the market, with leading crypto news sites, as well as social media sources, popular with the crypto community like Reddit, Twitter, and Telegram.
Social media has become one of the key platforms regarding announcements and public discussions in the crypto world.
5.) Think About Risk Management
When trading coins and tokens with lower market capitalizations, you can earn much higher percentages, yet the risk is generally higher too.
The first and most important of our tips for crypto traders relate to mitigating your risk. For example, if you are hoping to make a larger profit, by purchasing altcoins with lower market caps, the risk will be higher.
On each trade, you need to calculate your risk/return ratio, be careful with position sizing, and utilize Stop Loss and Take Profit tool