If you have got some experience in trading crypto assets, you have probably seen such an option as crypto futures contracts on large exchanges and platforms. So in this article, we would like to discuss the pros and cons of this tool and describe perpetual trading crypto contracts, which you can find on the WhiteBIT trading service.
What are Futures in Crypto?
Futures agreements allow traders to guess how the value of digital coins is going to change. These contracts let traders purchase or sell an exact amount of assets at a certain rate and date. Traders usually choose contracts with the highest trading volume and the lowest level of volatility when they want to trade crypto futures. This is precisely why Bitcoin is the best crypto for futures trading.
Here is a step-by-step explanation of how these financial instruments work:
- Specifications of contracts come with specific details that traders must consider before making any decision – quantity of cryptocurrency per contract, the asset being traded, the deadline, and the settlement price.
- Traders have the option to assume either a long or short position. Opting for a long position indicates the trader’s belief that the price of the crypto asset will rise. Conversely, choosing a short position indicates the expectation of a price decrease.
- Margin and leverage. In most cases, futures require traders to deposit an initial margin, which is a fraction of the total value of the contract. This margin acts as collateral, ensuring that the user can manage potential losses. Leverage, on the other hand, allows traders to amplify their exposure to the market by borrowing funds to open larger positions than their initial capital.
- Settlement. Futures contracts have a predetermined expiration date, and on this date, the contract is settled. The trader is then obliged to either buy or sell the specified amount of coins at the agreed-upon price.
- Risk management. Trading futures involves a degree of risk, including price volatility and the potential for significant gains or losses. Traders should use risk management strategies such as setting stop-loss orders to limit potential losses and diversifying their trading portfolio.
To understand all the pros and cons of crypto futures, welcome to the WhiteBIT blog and exchange where you can try this method with demo tokens. WhiteBIT is a cryptocurrency exchange platform that offers perpetual futures agreements, which are derivative products with no expiry date. Unlike traditional futures, perpetual trading crypto contracts do not have a fixed maturity date. This means that traders can hold their positions for as long as they want, providing greater flexibility. The contracts are designed to closely track the underlying spot market price of the cryptocurrency.
The platform offers traders flexibility, leverage, and support for a range of cryptocurrencies, allowing them to capitalize on market movements and potentially generate profits. Nonetheless, it is crucial for traders to comprehend the associated risks and establish a robust trading strategy.