How to Trade Futures
Trading futures contracts on Cryptology is not as difficult as it might seem at first glance, but be careful, as futures trading carries more risks than trading on the spot market. If you already have a verified Cryptology account, you will be able to start trading futures in the next few minutes.
Before trading, it is desirable to understand the basic terms that are used in the futures market. Below are the basic terms you will need to understand the futures market.
- Futures are contract agreements to buy or sell assets in the future for a set price. When you make a futures contract, you do not buy the asset itself since the futures contract is a derivative. Hence the main difference between the futures market and the spot market: on the spot market you purchase and own the asset, but futures trading works in another way - you take a position on an asset without actually owning it.
- Leverage is one of the most important tools in futures trading. Leverage allows you to maximize the profit. For example, to buy 1 BTC on the spot market, you will need tens of thousands of dollars, depending on market prices. Let's say the current price of Bitcoin is $15,000, so you need $15,000 to buy 1 BTC. A futures contract allows you to open a futures position on an asset by paying only a fraction of its cost. This is possible only with leverage. The more leverage, the fewer funds you need to invest in a position, but the higher the risk of liquidation of your position will be. For example, with x10 leverage, you do not need the entire amount ($15,000), but only $1,500 to buy a 1 BTC contract. Leverage is not available in spot trading.
- Position "Long" - purchasing an asset in anticipation of a further increase in the price of the asset. Can be compared to buying. Long traders or buyers are called “bulls”. The name of the growing market - is “bullish”.
- The “Short” position is an entry into a deal in anticipation of a further decrease in the price of an asset. The “short” mechanism is more complicated and difficult to understand. In simple terms, you borrow an asset from the exchange and then sell it at the current price. When the price goes down, you buy the asset and return it back, and take the difference between the prices as your profit. Currently, this process is automated and happens instantly, so you do not need to borrow an asset from the exchange and sell it yourself. On our platform, you just need to open a position, and the system will do every step automatically. Short traders (or sellers) are commonly referred to as “bears”. This is why a down market is called a bear market.
- Position liquidation. The most unpleasant term for every trader. Liquidation is the forced closure of a position due to insufficient maintenance margin for the position. The higher your leverage and the lower your maintenance margin, the higher the risk of liquidation of your position.
You can find the rest of the futures market terms in our Futures Trading FAQ article.
You can find the instructions on how to start trading on Futures below:
- First of all, you need to deposit funds to the Futures balance of your Cryptology account. There are several ways to do this: you can make a deposit to the address of your Futures wallet, and also you can transfer funds from your exchange wallet to the futures one. There are two Base assets available for trading on Futures: USDT and BTC.
- Go to the Futures page:
- Choose the leverage for your Futures position. To do this, click on the "Cross" button and select the leverage:
- Select the type of position you would like to open (long or short), order type, and enter the position size. You can open a position both at the market price and at the price of a limit order.
There are two additional types of orders in the futures market: Stop Market and Stop Limit. A Stop Market order is triggered by a stop price. When the stop price is reached, this order becomes a market order and the position closes at the current price. A Stop Limit order is a conditional order that is executed at a specified limit price after the stop price is reached.
The difference is that once the stop price is reached, an order will be placed at the limit price.
- Open a position and earn a profit!
Risk Reminder: Futures Trading is a high-risk instrument, it can both maximize your profits through the use of leverage, and lead to serious losses. Before trading futures, you should develop a trading strategy.