Beginners’ Guide to Crypto Futures Trading: Here’s What You Need to Know!

What Is Crypto Futures Trading?

In contrast to spot trading, Cryptocurrency Futures Trading requires traders to buy or sell derivatives contracts, which represent the value of a given crypto at a future date.

Trading futures allows investors to wager on the future value of cryptocurrencies. Traders can go long to bet on an advance in price or short to bet on a decline in price.  

Leverage is one of the most important benefits of futures trading. 

Trade Crypto With Leverage, traders are able to maximize their capital efficiency as they do not have to lock up their entire sums. However, they must always exercise caution when using leverage because it increases both potential returns and risks. 

Traders who are new to crypto derivatives trading should consider using leverage of 2x or 5x. This is especially true for traders wishing to use crypto derivatives as defensive hedges. In the event that an asset performs poorly, or contrary to what is speculated, a futures trade hedged against this outcome with a certain amount of leverage can compensate for the loss.

The 5 Steps to Successful Futures Trading

In order to succeed in futures trading, you need to understand how the market changes and adjusts over time, how external factors affect the market, and how people are influenced to participate. 

As there is so much information to digest and little experience or knowledge to navigate with, it is no surprise that many new traders have difficulties getting their bearings and eventually bottom out. This is why following a strategic approach to trading is so crucial.

1. Decide what trading method to use

It is more than just replicating a highly profitable strategy found on YouTube or social media to find a trading methodology that works. A trading methodology has to be tailored to your psychological traits, lifestyle, risk tolerance, and long-term goals. 

2. Create a trading plan

Developing a trading plan can assist you in managing risk better and improve your trading consistency. To do so, you should include a detailed description of how you will enter and exit positions, including entry and exit indicators, position-sizing, and stop-loss placements. 

Traders should become aware of their trading habits in order to make highly targeted developments and treat trading seriously. There are many advantages to having a trading strategy, from lowering trading stress to missing fewer trades.

3. Managing risks properly

Managing risk is the most important part of trading. It begins with setting boundaries for what you deem acceptable or unacceptable losses in a trade. 

Futures traders should treat every dollar as if it were worth 100 times its actual value. If your account is worth $1,000, losing more than $10 should be avoided at all costs. 

Winning in small doses over time is crucial to building a proper account when traders have a long-term perspective.

It is important to manage risk in order to protect capital, ensure realistic expectations, and avoid letting emotions run your trades. 

4.Trade Responsibly

A trading career can be destroyed by emotional or compulsive trading behavior, which is considered gambling behavior. You can mitigate these psychological traits by minimizing leverage, decreasing the number of trades performed during a particular period, setting conservative goals and targets, and never trading with money you cannot afford to lose. 

Trading futures can be risky, so letting losses go and avoiding “lucky runs” are responsible approaches. 

5.Continuous Education

Bitcoin, or cryptocurrencies in general, are a new asset class, so people are constantly discussing them and working to improve them, which is why they’re so exciting. 

In order to maintain a competitive edge, you must stay abreast of the blockchain industry and constantly seek ways to improve your trading skills. You can always plan for what’s to come with the help of education, as it will provide you with more decisive insights into market movements in the future.