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Increase your Crypto Profits with Futures

increasing crypto profits with futures

May 25, 2021 | 

569 Views | 

JOHN K MWANIKI | 

Get Into Cryptocurrency Trading Today

There are several reasons why a trader would want to choose the futures option when trading in the cryptocurrency markets. They offer benefits like significant leverage, high liquidity, easy access to several markets, among others. These advantages are what make futures very attractive to most investors. It is possible to get rich from futures trading. That being said, it doesn't mean every single trader who has traded in futures has either profited or made a lot of money. The reason is that although they are a versatile security, your trading outcome is heavily reliant upon your strategies, regardless of the type of security you are dealing with.

What is a future?

A future refers to a contract or agreement drawn up to purchase or sell an asset where the price is pre-set at the contract's conclusion. It is a pre-set period in the future. At the end of the agreement, all parties involved must oblige to fulfill the agreed conditions no matter the market price. Futures trading is mainly beneficial in that the exchanges provide for shorting and leverage trading.

What is leverage/margin trading?

Leveraged trading is also called trading on Margin or Margin trading. It is a system that allows you to open positions that are much larger compared to the capital you have for trading. All you'll have to do is invest a percentage of your position. Leverage is the ratio between your position value and investment needed. On the other hand, required margin refers to the percentage of position value required to open a future trade.

Although you require less capital for leverage trading which is a significant advantage, there are still some risks of incurring losses. In the same way that you can earn a lot compared to your initial investment, losses can also occur at a similarly large scale. Hence, it is vital to track your open positions and apply loss-reduction strategies such as stop-loss to avoid incurring heavy losses.

So, you might be wondering why futures contracts are a much better option for crypto trading than the others. Apart from the two benefits mentioned previously, there are several other reasons why you should consider futures trading. Here they are.

Benefits of Futures Trading

1.Liquidity

You should never underestimate liquidity as a cryptocurrency trader if you want to make profits. If you trade in an illiquid market whereby there isn't anyone to take care of the other side of this trade, you will likely encounter slippage at massive volumes. Luckily for you, futures are typically very liquid. Furthermore, they can, at times, be the only security that is tradable. This feature of futures makes it easier to gain high profits because you will pay less slippage. Additionally, you could extend to new markets that may not be tradable with some securities.

2.Leverage

Leverage is inbuilt into futures. That, therefore, means that you can have more control over your underlying asset other than just the amount you need to open a trade. Most futures contracts will only need as little as 5% underlying value for the initial margin. The initial margin is the amount you need to open a position. For instance, if one futures contract's worth is $100, you can get yourself into a position while having as little as $5 in your account.

3.Low costs

Unlike the other securities in the crypto market, futures are cheap compared to the market exposure you will enjoy. Trading a single contract might cost you only $0.25 for each side. That coupled with very low slippage is sure to help you retain much more of your profits. In the long run, you will undoubtedly profit a lot from futures trading.

4.Short selling

Short-selling in futures is as easy as long-selling in the same. All you'll have to do is to press your sell button, and that's about it! This is very different from other securities such as stocks. With these other securities, the short-selling option is suspended during great falls in the markets to keep them afloat. That means that right when you specifically want to utilize the short-selling option, it will be suspended. That presents a serious hindrance that will work to your disadvantage. That is why futures trading is the best way to go, as there is no such limitation.

Futures are also beneficial for miners since they can use them as a way of hedging risks.

How to get trading strategies

1.Personal strategy 

You can create a personalized trading strategy by using tools in Trading View, such as technical indicators. You can also automate your trading strategy. If you want to use a bot when trading with leverage, you will need to connect your account to your preferred futures exchanges platform. Once you successfully connect to the exchange, the bot's settings will proceed to activate the leverage functions.

2.Ready-made strategy

You can also use a third-party strategy that is ready to use. Before selecting a ready-made strategy for your trading, assess the different signals in the market. That allows you to choose a signal that is going to offer the most benefits for you. Once you purchase it, ensure that you automate it and automate it with leverage too.

How to benefit from futures trading 

Using your futures trading platform is easy. Click on the Transfer button above the Buy and Sell utility on the lower right half of your screen. A window will appear, and that is where you should enter the USDT amount that you wish to transfer from your exchange wallet to your futures wallet. When you need to replenish your futures funds, you will also need to have some USDT or BNB on this exchange account.

The cryptocurrency market has witnessed so much growth within the past few years. It provides an excellent opportunity for investors to grow their assets and venture into the market of digital currency. If you are already a trader, consider futures trading, and you will undoubtedly profit from this decision. 

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