Cryptocurrency trading is an excellent way to multiply initial investments, but at the same time, it is the riskiest way. Traders use different tools to make a profit in this market. These are simple basic financial instruments of crypto conversion as well as advanced trading tools such as cryptos futures and trading with margin. We would like to discuss futures trading in this article.
How Does Crypto Work for Futures?
While regular crypto trading implies buying and selling digital assets at a different value, using trading strategies, futures trading does not necessarily mean buying coins in fact – instead, it means buying a contract for the future purchasing or selling of coins.
Next, when it comes to spot markets, traders purchase and sell coins here and now at the present price and receive coins immediately. When it comes to crypto futures, traders do not use the present value of assets at all. Instead, they forecast the future price and build their strategy based on the prediction. Suppose you think the BTC rate will grow next month and want to earn from it. In this case, you open the position “long” and indicate the day when you owe to sell coins. If the asset’s value grows by that day, you make a profit; if not, you lose funds.
This trading tool also works on the downward market. If you estimate that the asset’s rate will fall in a month or any other period, you sell your coins beforehand and then buy them back at a low value. Thus, you have coins and a profit. Again, if your prediction is incorrect, you lose funds.
So, the most important thing in futures is the ability to analyze the market and predict its future movement. For that purpose, traders do the following types of research:
- Technical – covers the indicators and patterns of the asset, taken from its price chart. This analysis helps to understand how the asset behaves, how it reacts to the market’s sharp jumps, etc. Based on this data, a trader can forecast how the asset will behave in the future.
- Fundamental – cover a wider scope of information that includes external factors that affect the crypto market – the world’s economy, inflation, etc.
Is trading futures profitable? It is, but if you know how to analyze the market and use a reliable platform for it. You may trade crypto futures on the WhiteBIT exchange.
