Cryptocurrency trading has been provided for over ten years now. Therefore, most of the instruments and trading techniques typical for conventional trading are now applicable to the cryptocurrency market as well. Cryptocurrency exchanges enhance the trading experience by providing advanced tools and features for trading to be smooth yet secure.
Standing among leading cryptocurrency exchanges, Binance has rapidly conquered a devoted user base. The exchange offers not only a wide range of trading instruments but also provides comprehensive glossaries and crypto trading tutorials via its Binance Academy. Most importantly, the crypto exchange has an intuitive UX and UI so that professional and crypto novices can trade efficiently, even when using advanced cryptocurrency trading techniques like futures.
What are futures? What are the advantages and disadvantages of futures? What is leveraged trading? And finally, how to trade futures on Binance? We are going to inspect all the aspects and provide a step-by-step guide on Binance Futures. Here we go.
What Are Futures?
Futures or futures contracts are trading instruments that can also be applied to cryptocurrency trading. A futures contract is an agreement between traders to buy or sell assets at a predetermined price and at a specific time in the future. The following example illustrates the way futures work.
Imagine you are a farmer and you will need grain that currently costs $200 per tonne in 6 months. The grain price may either increase or decrease in 6 months (it also may remain the same). You believe the price will go up, so you offer your grain supplier a deal – you will buy 10 tonnes of grain at the current price of $200 in six months. A supplier does believe the price will go down, so he accepts your offer. Half a year later, the price per 1 tonne of grain increases and it now costs $210. As you and the supplier made a deal, you purchase 10 tonnes of grain at $200 with a $100 profit. In this example, such a deal is a futures contract.
Binance offers leveraged trading when interacting with Binance Futures. Consequently, there is a question: what is leveraged trading?
Leveraged trading (also referred to as margin trading) is a system that allows traders to open positions with a greater amount of funds than they have at the current time. The ‘margin’ is an initial investment a trader should provide, while the ‘leverage’ is a ratio between a position value and the margin (investment needed to open a position). Depending on the exchange and a traded asset, the leverage is provided by either an exchange or other traders.
You decide to buy 1 BTC at a price, say, $10,000, but you have just $1,000. In this case, you can start margin trading with a leverage of 10:1. The leverage is provided; you put your $1,000 of margin and start trading.
Leveraged trading can be used for both long and short positions. Just a quick reminder of what they are. You open a long position when you believe the price of your asset will rise. As an opposite to a long position, there goes a short position when you assume the price of an asset will go down.
When you open a position, it is crucial to remember that your margin acts as collateral for the leveraged funds. If the market’s movements are against the position, brokerages do have a right to sell your margin in order to cover losses.
Margin trading is usually applied to low-volatile markets. However, the crypto market also provides opportunities for leveraged trading. Due to the highly volatile nature of the cryptocurrency market, a trader should take both the risks and responsibilities. Margin trading is not recommended to novice traders.
Binance Futures currently supports 24 trading pairs to trade against USDT.
|Bitcoin (BTC/USDT)||Ethereum Classic (ETC/USDT)||Dash (DASH/USDT)|
|Ethereum (ETH/USDT)||Chainlink (LINK/USDT)||Ontology (ONT/USDT)||Qtum (QTUM/USDT)|
|Bitcoin Cash (BCH/USDT)||TRON (TRX/USDT)||Cosmos (ATOM/USDT)||NEO (NEO/USDT)|
|EOS (EOS/USDT)||Stellar (XLM/USDT)||Binance Coin (BNB/USDT)||VeChain (VET/USDT)|
|Ripple (XRP/USDT)||Monero (XMR/USDT)||Tezos (XTZ/USDT)||IOTA (IOTA/USDT)|
|Litecoin (LTC/USDT)||Cardano (ADA/USDT)||Zcash ZEC/USDT)||Basic Attention Token (BAT/USDT)|
Binance Futures: Step-by-Step Guide
First things first, you need an active Binance account. Binance exchange provides intuitive UX, so signing up an account will not meet any obstacles. Once you create a regular Binance account, find a Futures tab at the top bar of the landing page and click it.
At the lower right corner, there is a notification for you to open a futures account on Binance. Click the ‘Open Now’ button.
Now you have a Futures Account on the Binance Exchange.
The next step is to transfer your funds from your regular Binance wallet to the Futures wallet. To do so, click the ‘Transfer’ button and enter the amount of funds you want to move to the Futures wallet. As mentioned above, there are 24 cryptocurrencies traded against USDT stablecoin. Therefore, you have to obtain a certain amount of USDT on your regular Binance wallet.
Leveraged Trading on Binance Futures
As you can see on the trading terminal, a trader can easily adjust leverage. If you decide to use a 50x leverage with 100 USDT provided as margin, the position will be opened at 5,000 USDT. Note also, that the maximum leverage for BTC/USDT is 125x. The rest of altcoins has 75x leverage. Margin trading on Binance Futures is available for short and long positions. Binance cares about its users and warns about high-risks.
There are several trading orders available on Binance. These are:
- Market order (reduce-only)
- Stop Market order
- Take Profit Market order
- Stop-Limit order
- Take Profit Limit order
- An array of limit orders including IOC (Immediate or Cancel), FOK (Fill Or Kill) GTC (Good Till Canceled), and Post Only order.
Cross and Isolated Margin
Binance offers two types of margin modes – isolated and cross margin modes. According to Binance, cross margin mode allows you to share your margin balance across all open positions to avoid liquidation. If there is liquidation, a trader risks losing the whole margin balance and the rest of open positions. Cross margin mode might be more capable of resisting potential losses.
Isolated margin mode allows you to manage your trading risk by assigning your margin to a position restricted to a certain amount. Once the margin ratio of your position reaches 100%, your position will be automatically liquidated. While using this mode, you are able to adjust your margin, decrease, or increase margin before the position is liquidated.
Check-Ups before Trading Futures on Binance
- Choose a trading pair and set a desirable margin mode;
- Adjust the leverage. Please note, the higher the leverage is, the higher are risks;
- Check the Mark Price. The Mark Price is the latest price for your contract that is used for margin calculation. Usually, liquidations occur based on the Mark Price;
- Check the Funding rate (the expected funding rate);
- Set a trading order.
Binance Futures provides a test mode to trade futures for those who want to practice before starting a live mode cryptocurrency trading.
Binance Futures Trading Fees
The Binance exchange provides a Tier system with nine levels. Your trading fee level is 0 by default. To gain level 1, a user needs to trade another 50 BTC in the spot trade market as well as increase the BNB balance by 50 BNB. Binance futures fees are as follows:
Binance Futures Pros & Cons
Just like everything in life, trading on Binance Futures has its strengths and weaknesses.
|No need to keep a large amount of assets on the exchange;||Futures trading required trading experience. It’s not recommended for beginners;|
|You can trade more crypto than you actually have due to the provided leverage (up to 125%);||Due to high volatility, cryptocurrency prices can increase or decrease drastically within minutes. Applying high leverage bears high risks;|
|An opportunity to trade futures in a test mode;||When trading in online mode, you need to use appropriate ‘risk management’ techniques;|
|Relatively low trading fees;||To gain level 1, you should have another 50 BTC and 50 BNB on your balance.|
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Before trading on Binance Futures, make sure you are familiar with basic definitions. Futures are considered to be high-risk trading, especially on a volatile cryptocurrency market. Remember the golden rule: trade an amount of funds, you are not afraid to lose. You can always try to trade futures on Binance in a test mode. Changelly wishes you safe trading!
Disclaimer: This article should not be considered as offering trading recommendations. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. While price analysis is a useful tool, it should not be considered predictive for the future performance of any investment vehicle. Any investor should research multiple viewpoints and be familiar with all local regulations before committing to an investment. Website personnel and the author of this article may have holdings in the above-mentioned cryptocurrencies.
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