{[{item.pair.split("_")[0]}]}

${[{item.price.toLocaleString(undefined, {maximumFractionDigits: 4})}]}

{[{item.change24}]}% Vol {[{ item.volume.toLocaleString(undefined, {maximumFractionDigits: 2}) }]} USDT

+{[{item.change24}]}% Vol {[{ item.volume.toLocaleString(undefined, {maximumFractionDigits: 2}) }]} USDT

Trading Bitcoin Futures

trading bitcoin futures

May 11, 2021 | 

510 Views | 

JOHN K MWANIKI | 

Get Into Cryptocurrency Trading Today

When trading bitcoin futures, you are speculating on the future price of bitcoin. So you have to speculate if the bitcoin futures contract will fall above or below the strike price when it expires. The strike price is what the markets predict will be the value of the bitcoins when the contracts expire. Mostly, a bitcoin futures contract has a period of three months, although it can be longer or shorter depending on the agreement.

For instance, suppose the current value of bitcoin is $17,500 and a three months bitcoin futures contract has a strike price of $16,500. This implies a future bearish sentiment on the bitcoin value. In this case, your work as a trader is to speculate whether the bitcoin futures contract will expire above or below $16500 in three months. The possibility of profits or losses depends on the accuracy of your prediction. If you predict correctly, you lose, but you incur a financial loss if you predict wrongly.

An example of a bitcoin futures contract 

You have a three months bitcoin futures contract featuring a strike price of $18000. You predict that in three months, bitcoin value will be more than $18000, and you go long. Every futures contract is worth $500, and maybe you buy five of them. When the futures contracts expire, the bitcoin is $20000, which is $2000 more than the contract's strike price. Since you had five contracts, your total profit is $10000.

Remember that you must sell or buy the bitcoins when the contract expires, but you can offload your futures contracts before the expiration date to trade in a more risk-averse way. For example, you can lock in your profit in advance or cut your losses on a trade you are sure will lead to more significant losses at the time of expiry of the contract. Note that bitcoin futures also allow you to go short, which means that you are speculating on the value of bitcoin to fall in the future.

Trading bitcoin futures

Before you start trading bitcoin futures, you must note that there are no bitcoins involved, and the contracts settle financially in cash, so no exchanging of bitcoins. Here you only speculate the future price of bitcoins and buying or selling the underlying bitcoins. 

Also, you don't need a crypto wallet because bitcoin futures contracts settle financially on the expiration date. Or traders offset them as they reverse out of their positions when the contract expiration nears. Suppose the buyer or seller in a bitcoin futures contract maintains the position and shows gains on the delivery date. In that case, the margin value between the purchase and settlement price goes to the futures contract holder. 

To begin trading bitcoin futures, you need to open an account with a registered bitcoin futures broker who maintains your account and guarantees the trades.

  • Understand how bitcoin futures trade

Bitcoin futures contracts have high margin requirements. For instance, in CME, the maintenance margin requirement for bitcoin futures is 37% of the value of the futures contract. A hedger's initial margin is 100% of the maintenance margin, while for speculators is 110% of the same. Although you can get margin offsets with other financial products on CME, the privilege is not available to new traders.

Margin requirements differ from one to another futures broker based on the trader and the market. Other influencing factors include how closely the futures price monitor the spot price, the market's liquidity, and how other market markers are positioned.

  • Come up with a trading plan

The next thing you need is to develop a strategic trading plan depending on the level of risks you are willing to experience and your goals for each trade. Consider the fundamental and technical analysis indicators you intend to use to determine the buy and sell signals and how you plan to track the price and market trends.

  • Find a bitcoin futures broker

You have to find professional and experienced bitcoin futures brokers since that could make a huge difference in your long-term success. You can try more than two until you get one that suits you.

  • Test your trading plan

The futures broker you select should provide you with a demo system to test your trading plan and get the feel of real-time trading. You may not know how to navigate in bitcoin futures until you put your approach to the test. 

Using a trading simulator for a trial allows you to test your trading plan without committing any funds and addressing any issues early. It also allows you to test the futures broker's services which can help you make an informed choice in selecting a broker.

When you are confident with your trading plan, it's time to fund your account and start profiting from bitcoin futures contracts. Keep in mind that trading in small amounts initially is less stressful and saves you more. You can build your account with small trades then increase your position size with time.

  • Go live

The next step is to start trading bitcoin futures in your live account. You must note that bitcoin futures contracts are more capital intensive and require more capital than bitcoin spot trading. You need just enough trading money to achieve margin requirements.

Critical things to keep in mind when trading bitcoin futures

  • Expiry date- always keep in mind when your bitcoin futures contract expires.

  • Strike price- this is the price of the bitcoin futures contract as set by the markets.

  • Long or short- with the strike price and expiry date in mind, determine if you want to go long or short. Going long means that you speculate the contract to expire at a higher price than the strike price while going short is vice versa.

  • Calculating the profits or losses- you can work out the percentage gain or loss against the initial stake.

CONCLUSION

Bitcoin futures trading has revolutionized the cryptocurrency space and provides a perfect opportunity for savvy traders to profit.

Buy & Sell Cryptocurrency Instantly

Did you like this article?

NEWS

COMMENTS (0)

Manage your own Watchlist

Access all education lessons

Converse with other crypto enthusiasts

Be a part of the Interactive Crypto Community

LIVE RATES

ALL

TRENDING

Total Market Cap The Total Market Capitalization (Market Cap) is an indicator that measures the size of all the cryptocurrencies.It’s the total market value of all the cryptocurrencies' circulating supply: so it’s the total value of all the coins that have been mined.

{[{ marketcap }]} {[{ marketcapchange.toLocaleString(undefined, {maximumFractionDigits:2}) }]}% (24H) {[{ marketcapchange.toLocaleString(undefined, {maximumFractionDigits:2}) }]}% (24H)

Symbol

Price Cryptocurrency prices are volatile, and the prices change all the time. We are collecting all the data from several exchanges to provide the most accurate price available.

24H Cryptocurrency prices are volatile… The 24h % change is the difference between the current price and the price24 hours ago.

Trade

{[{ item.name }]}
   {[{ index + $index}]}     {[{ item.pair.split('_')[0] }]}

Ƀ{[{item.price.toLocaleString(undefined, {maximumFractionDigits: 5}) }]} ${[{item.price.toLocaleString(undefined, {maximumFractionDigits: 5}) }]}

{[{ item.change24.toLocaleString(undefined, {maximumFractionDigits: 2}) }]}%

{[{ item.change24.toLocaleString(undefined, {maximumFractionDigits: 2}) }]}%

TRADE

Showing {[{ showing }]}

Symbol

Price Cryptocurrency prices are volatile, and the prices change all the time. We are collecting allthe data fromseveral exchanges to provide the most accurate price available.

24H Cryptocurrency prices are volatile… The 24h % change is the difference between the current priceand the price24 hours ago.

Trade

{[{ item.name }]}
   {[{ index + $index}]}     {[{ item.pair.split('_')[0] }]}

Ƀ{[{item.price.toLocaleString(undefined, {maximumFractionDigits: 5}) }]} ${[{item.price.toLocaleString(undefined, {maximumFractionDigits: 5}) }]}

{[{ item.change24.toLocaleString(undefined, {maximumFractionDigits: 2}) }]}%

{[{ item.change24.toLocaleString(undefined, {maximumFractionDigits: 2}) }]}%

TRADE

Showing {[{ showing_trend }]}

WHAT'S NEW

NEWS

REVIEWS

BROKERS

WALLET