Crypto trading is the way to make money from the difference of digital currencies' rates. Strategies of crypto trading can be so different. Some are easier and suitable for beginners, while others are highly risky. Many strategies imply using trading bots to have more efficient control over the market changes. Some even allow making a profit from a small amount of money. It means that even if you have a small initial capital, you have the opportunity to multiply it 2, 5, 10, or even 100 times. That's where the crypto futures topic comes from.
In simple terms, trading futures is a highly risky option to trade crypto associated with market speculations. Having an idea of where the market will move further, you can predict an asset's rate in some time frame.
Suppose you have a few ETH coins and you are confident that the project is about to boost. In this case, you open a "long" position, which means the ETH price will grow, in your opinion. When concluding a derivative contract, you specify the rate (your forecast for the ETH price) and the date when the contract expires. Then you wait till that day comes and receive a lot of gains in the case your forecast was correct and the Ethereum price really skyrocketed. And lose if the forecast was wrong.
If, for example, you believe that the asset's price will drop, you go "short". A short position means you are trying to gain earnings in the downward-moving market. And that is the way many traders succeed. Indeed, if your forecast does not come true and the asset's rate grows by the contract date, you lose money anyway. So the successful result for you, in this case, would be the asset's rate drop.
What Is Leverage In Futures Trading?
Crypto futures imply price prediction for the future. Many credible crypto platforms propose tools for this type of trading along with different leverage. What is futures trading leverage? - It is the number your initial investment multiplies if you make the correct forecast. Depending on the service you work with, they may be different - X2, X10, X100. So when you go long, you can pick leverage, and your small initial amount of assets will multiply if the market changes match your prediction.
Key things about leverage:
- You can control your risks. Picking the size of the leverage, you understand what losses you will bear if the market moves in the opposite direction.
- Picking larger leverage, you face more significant risks. So it is better to choose small leverage for beginners.
- Leverage is borrowed funds. You borrow from a platform reserved funds, or there is also an option when other platform users loan their assets.
- The amount of money you earn or lose depends on the leverage you pick. It may be far more considerable than your initial capital. Even 1% price fluctuation matters.
Here are the exchanges that allow for crypto futures leverage: WhiteBIT, Binance, Kucoin, PrimeBit, and ByBit.
On the WhiteBIT platform, you can take advantage of futures trading in a demo account. It's crucial to have enough practise before trading with real money, especially when it comes to such risky and complex types of trading. On demo trading, you don't use your own funds but coins specially designed for practising. You can try different leverages, see how they work, and find the pitfalls and opportunities you could miss when trading real money.
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