Cryptocurrency Futures Explained – Basic Guide

There are different ways to trade virtual currencies. You can use spot trading or trade with cryptocurrency futures. In this guide, we are going to share with you the main differences between spot and cryptocurrency futures and how you can profit with this trading strategy. 

Disclaimer: this post should not be considered investment advice. This is only for educational purposes only. Never invest more than what you are able to lose and always ask for information to your professional financial advisors. We are not financial advisors.

What are Cryptocurrency Futures?

Cryptocurrency futures allow traders to gain exposure to the virtual currency market and betting on whether the price of virtual currency would move higher or lower. This is the main difference with traditional spot trading, where you can only expect the price a digital asset to move higher. 

With cryptocurrency futures, you are trading derivatives. These are contracts that are based on the price of an underlying asset, in this case, of cryptocurrencies. These traders will be opening trades to buy or sell a contract at a specific time in the future and at a predetermined price.

However, most of the cryptocurrency trading platforms offering crypto futures are also allowing users to trade perpetual contracts. Perpetual contracts do not have a specific expiry date. You can hold this position as long as you want, which is going to make it easier for you to trade. 

Cryptocurrency futures are also allowing users to increase their exposure to the market by using leverage. Users can trade with margin and increase their profits if their trade moves in the right direction. 

Cryptocurrency Futures vs Spot Trading

Futures trading is one of the most advanced ways for users to trade in the cryptocurrency market. Spot trading is the simplest way to do so. If you just want to gain exposure to virtual currencies and trade digital assets, the spot market is going to be the right way to do so. 

Instead, if you prefer to gain more exposure to cryptocurrencies or bet against the price of a virtual currency going up, then Cryptocurrency Futures will give you all the trading tools you need. 

One of the best platforms to trade both futures and spot is Binance. This exchange is offering one of the best solutions for traders that want to handle digital assets. The platform is offering perpetual futures contracts and also quarterly Bitcoin futures that would help traders diversify their risk. 

By using Cryptocurrency futures, traders will also be able to trade with margin and open a leveraged position. You can use $1,000 (close to 0.1 BTC) to buy 1 BTC if you use 10x leverage. In this case, your initial margin is going to be 10% of the total order. This would act as your collateral to keep your position open. If you don’t want to be liquidated, then you should also use stop-loss order that would reduce your losses to the minimum. 

Despite having the possibility to trade with leverage, you need to also know that this is very risky. If you do trade with large leverage, then your position could be heavily affected and liquidated with small fluctuations in the price of the underlying digital asset. 

Trade Like a King With AltSignals

AltSignals is one of the best and most recognized trading signals providers in the world. The company has been offering some of the most accurate trading signals in the last few years. Users will be able to trade in both futures markets and spot exchanges. This is going to make it very profitable for users that want to improve their trading strategies over time. 

It is worth taking into consideration that AltSignals is also supporting the Cornix trading bot to automate trades. If you want to get some extra funds and profits at the end of the month, you can easily set up the Cornix trading bot and follow AltSignals to get some of the most accurate trading signals in the world. 

Conclusion – Cryptocurrency Futures Explained

In this guide of Cryptocurrency futures, we have explained to you how it is possible to trade with virtual currencies in both spot and futures markets. Traders will be able to improve their strategies by using margin and also futures contracts in the cryptocurrency market. 

Remember that trading with leverage can be very profitable but it is also very risky. Before trading always ask information to your professional financial advisor and never invest more than what you are able to lose.