Crypto futures trading is a popular way to trade digital assets such as cryptocurrencies. It allows traders to enter into contracts to buy or sell an asset at a future date and price without actually owning the underlying asset. This flexibility can be particularly useful in managing risk and taking advantage of market volatility. Why does futures trading attract so much attention, what types of futures are there, and how to trade them? Find answers in this guide.
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What is futures trading crypto?
Futures contracts or Futures are derivative financial tools. They are similar to traditional futures trading but involve digital assets.
In crypto futures trading, a buyer and a seller agree to buy or sell a specific amount of a particular cryptocurrency at a predetermined price and date in the future. When the appointed time arrives, the parties must meet their obligations regardless of the market price of the purchase at that moment.
One of the main advantages of crypto futures trading is the ability to leverage your trades, which means you can control a more significant position with a smaller amount of capital. However, this also increases the risk, and it is essential to manage them carefully.
What kinds of crypto futures are there?
There are two central crypto futures contracts— Standard futures and Perpetual futures.
Standard futures contracts
Standard has a fixed execution date. They divided into two groups:
Delivery futures: In this type of contract, the buyer and seller agree to exchange the actual cryptocurrency at a specified time and price in the future. The seller must deliver the underlying asset to the buyer at the expiration date, and the buyer must pay the agreed-upon price.
Cash-settled futures: In this type of contract, the parties settle the contract with a cash payment based on the difference between the contract price and the market price at the expiration date. The exchange or broker calculates the settlement amount and pays the difference to the appropriate party. Cash-settled futures are more commonly used by traders and investors who do not require the actual asset and prefer to profit from price movements in the cryptocurrency market without taking possession of the underlying asset.
Perpetual futures contracts: Perpetual futures contracts are a type of contract that does not have an expiration date. They differ from standard futures contracts in that they do not require the delivery of the underlying asset at a specified time in the future.
Instead, profits or losses in perpetual futures are settled periodically through payments based on the funding rate, which is determined by the difference between the contract price and the spot market price at the time of calculation. The funding rate is paid to traders holding long or short positions in perpetual futures contracts.
Leverage is another crucial aspect of perpetual futures trading, as it allows traders to control a high-value contract with a much smaller investment through borrowed funds. This means that traders can amplify their potential profits or losses depending on the direction of the market movement.
Margin is also a critical component of perpetual futures trading, as it helps protect the trader and the broker from potential losses during an open position. To enter a position in the market, an initial margin is required, and the maintenance margin is the minimum amount necessary for an investor to maintain an open trading position. If the margin falls below the maintenance margin, the trader may be subject to a margin call, requiring them to deposit additional funds to maintain the position.
How to trade futures on WhiteBIT?
Any trader needs to find their ideal environment for making deals. You need to get the best exchange for futures crypto trading. There are many platforms now, but some offer more than others.
On the other side, is there the best crypto for futures trading? The question is too controversial, but on WhiteBIT, you will have plenty to choose from.
WhiteBIT is the largest European cryptocurrency exchange with over 3 mln users worldwide, 350+ trading pairs, and a maximum daily trading volume of $2.5B. The platform provides spot, margin, and futures trading with an adjustable up to 20x leverage.
WhiteBIT is one of the three most secure crypto exchanges, according to CER.live, and the second (AAA-rated) most secure exchange in the world by Hacken.
You can trade perpetual futures (PERP) on the following trading pairs:
USD-M futures (margined contracts) use Tether (USDT) and other stablecoins as collateral. The available trading contract is USDT-M, meaning that settlements are conducted in USDT.
When you see the inscription “2x, 5x, 10x leverage”, the number next to “x” indicates the ratio of your funds to borrowed funds. So, a 2x leverage means that you trade at a 1:2 ratio. In this case, the exchange provides a loan twice the original amount.
Example: You have 10 USDT and want to buy BTC. Let’s imagine that 1 BTC = 10 000 USDT. You can buy 0.001 BTC for 10 USDT. Let’s imagine you use 20x leverage and no longer have 10 USDT but 200 USDT. So, you can buy 0.02 BTC.
Guide to start futures trading on WhiteBIT
How to use perpetual futures (PERP) on WhiteBIT:
- Choose the Futures section in the upper-right corner of the exchange menu;
- Open the Buy Bitcoin tab;
- Choose the type of order, the amount of the asset you want to buy, and the leverage;
- Press “Buy.”
To sell a futures contract, do the same in the Sell tab. Find the funding rate and the countdown to its accrual in the upper-right corner.
Benefits of futures trading on WhiteBIT:
- The fees are lower than on spot and margin trading, 0.035% for takers (those who reduce an exchange’s liquidity) and 0.01% for makers (those who provide the liquidity to an exchange);
- Adjustable leverage up to 20x;
- The minimum contract size is 5.05 USDT.