A Beginner’s Guide to Crypto Futures Trading: How to Get Started

The financial world has been fascinated by cryptocurrencies for the past ten years, and as they have grown, new trading opportunities have appeared. The most advanced entry points to this market include crypto futures trading. It is a concept most people find interesting but confusing.

The beginner’s tutorial will cover the most basic foundations: risk management, best practices, an explanation of bitcoin futures trading, and a list of top platforms for trading cryptocurrency futures.

Cryptocurrency futures trading-what is it?

A trader can even bet on a future price of any cryptocurrency without having to hold the asset themselves by trading cryptocurrency futures, and traders sign a legally enforceable agreement that commits them either to buying or selling a particular cryptocurrency at an agreed-upon price sometime in the future.

The difference between the price at the end of the contract is made in cash or the underlying cryptocurrency is delivered as a settlement for these contracts. Other coins are offered on other platforms, but Bitcoin and Ethereum are the most frequently utilized cryptocurrencies in futures trading.

How Does This Work?

Cryptocurrency futures, then, are a betting game on the asset’s price fluctuation.

• If you believe the price will go up, you then create a long position and promise to acquire the item at some future price.
• If you anticipate a decline in price, you go short and agree to sell the asset at some future price which you set.

This way, traders have the opportunity of benefiting from falling and rising markets, which means it is a very desirable instrument for anyone who looks to make profits from market volatility.

How to get started with Crypto Future Trading?

Trading bitcoin futures may seem like a mind-boggling activity initially, but it can be approached and achieved through a couple of manageable steps:

Step 1: Select the Best Platform for Trading Crypto Futures

Before an individual embarks on starting trading crypto futures, he needs to select the best platform.

Various platforms that are there offer unique features such as leverage choices, fees, user interface, and security precautions.

Among the most popular exchanges for trading crypto futures are:

•  Binance Futures: It is known for its wide range of cryptocurrencies and affluent liquidity
•  Bybit: Best suited to the traders looking for simple to use features and robust liquidity
•  FTX: It offers a wide and rich trading environment with security underlining every element
•  Each of them has its advantages as well as disadvantages, so always do your research and select the one that suits your trading style and objective.

Step 2: Taking Advantage of Cryptocurrency Futures

With cryptocurrency futures, leverage enables you to control a substantial position using a relatively small investment.

For example, you can trade $1,000 worth of bitcoin using just $100 when applying 10x leverage.

Leverage, although boosting profitability, can magnify risks. You may lose money entirely in case of a swing against your position-or even more in extreme cases. That is why risk management in cryptocurrency futures trading needs to be understood properly.

Step 3: Formulate a Strategy

A savvy trader doesn’t go to the markets blindfolded. Among some of the best strategies that cryptocurrency futures traders put into action, some of the most popular are:

• Trend Following; it is a strategy that looks forward to getting long in a rising market and short in a falling one.
• Scalping refers to the procedure, which involves a series of quick, small trades, all aimed at making profits out of local markets’ fluctuations.
• Arbitrage is the profit taken from the differential price between two markets or platforms.

Select a strategy depending on your trading goals and risk appetite.

Experienced traders can use other sophisticated strategies like arbitrage while new traders can consider using simpler models, such as trend-following strategies.

Step 4: Monitor the market and adjust your positions

The crypto markets are volatile and may make rapid shifts. Effective traders stay on top of technical analysis, chart patterns, and market news. There is the secret to continuing profit in cryptocurrency futures trading: updating your position based on new information.

Step 5: Take Down Your Position.

A futures contract has an expiration date. Closing your position before this date means you seal in your profits or reduce the losses from that contract. In case the contract expires, you receive either the underlying cryptocurrency or a cash settlement.

Crypto Futures Trading Risks

• Volatility : The sharp price fluctuations of cryptocurrencies can result in both quick gains and quick losses. A winning position can become a losing one due to an abrupt collapse.

• Risks Associated with Leverage : Leverage increases both gains and losses. You run the risk of losing more money than you invested if you don’t manage risk well. Utilize little leverage at first.

• Liquidation : Your platform may liquidate your trade, resulting in the loss of your entire deposit or margin, if the market goes significantly against your position.

• Lack of Regulation : The less regulated environment in which cryptocurrency futures operate raises the possibility of fraud or hacking. Trade only on reliable platforms to reduce these risks.

Management of Risk When Trading Cryptocurrency Futures

Risk is probably one of the most basic considerations you make when you are trading bitcoin futures. You can get this form of investment protection by following the steps listed below:

Lockdown of Losses Using Stop-Loss Orders

With a stop-loss order, your position will be automatically closed should the price go against you by a given amount.

Make use of leverage

Though it may be on an upswing in the profit level, the losses can be pushed highly through leverage. First, reduce the leverage ratios until you get comfortable with the trend the market is heading to.

Diversification in Investment

Do not put your entire savings into a single asset or investment. Spread your cryptocurrency risk: Diversification is also a strategy for risk reduction.

Monitor the News

The world of cryptocurrencies is influenced by a number of technological inventions, events, and legislations. Awareness of such factors may sometimes help one take an informed decision.

Conclusion

Trading in bitcoin futures is pretty interesting for entering the market without necessarily holding any underlying assets. You earn money in any kind of bull or bear market if you correctly predict the price fluctuations. It carries with it quite a lot of risks for this kind of trading. With this in mind, you can safely start trading cryptocurrency futures once you know what it is, have picked out the best platform to trade on, are using leverage sensibly, and a good risk management technique.

Don’t forget the crypto market is very dangerous, though there can be extremely high returns: it’s very important to stay educated, to start small, and to never risk more than you can lose.