Futures on Binance are a popular financial instrument, but they carry very high risks, especially for beginners. If you're considering entering this field, you should be aware of the potential challenges and risks, as quick profits can be met with equally large losses!
1. Leverage: A Double-Edged Sword
Leverage in futures allows you to multiply the size of a trade with borrowed money, meaning you can enter a $1,000 trade even if you only have $100. While this can increase your profits, it can also quickly lead to the loss of your entire capital if the market moves against you.
Example:
If you use 20x leverage, this means that any 5% move against you will result in the trade being liquidated and all your capital lost.
2. Liquidation: A speculator's worst nightmare
When a trader enters into a trade and uses leverage, they must maintain a margin of safety in their account. If there is insufficient balance to cover losses, the trade will be automatically closed (liquidated), resulting in the loss of the entire amount invested in the trade.
3. Sudden market fluctuations
Cryptocurrencies are known for their high volatility. Within minutes, the price can rise or fall significantly, potentially leading to the liquidation of futures contracts even if the overall trend is in your favor. Some traders lose money in a "week," or a rapid movement, and then the price rebounds in the desired direction, but it's too late!
4. Funding Fee
If you hold an open position for a long period, you may be required to pay periodic financing fees. These fees can be high at certain times, potentially eroding your profits, especially if the position is already unprofitable.
5. Risks of price manipulation
There are accusations that some platforms (including Binance) are using trader data to their advantage or executing large-scale liquidations after sudden market movements. Some speculators believe that these movements are not random, but rather the result of liquidating as many contracts as possible before the price returns to normal.
6. The impact of sudden news
Breaking news such as a new regulation, a security breach, or a government announcement can cause sudden market crashes, resulting in futures liquidation even if you had good analysis in advance.
How to reduce risks?
✅ Don't use high leverage – it's better to start with a small leverage like 2x or 3x to reduce the risk of liquidation.
✅ Set a Stop Loss – Do not enter a trade without setting a stop loss level.
✅ Avoid investing with your entire capital – don't invest all of your money in futures, but allocate only a small portion.
✅ Don't trade during important news – The market becomes unpredictable after big news, so it's best to stay away during these periods.
✅ Learn technical and fundamental analysis – Understanding how the market works helps you make smarter decisions.
Conclusion
Trading futures on Binance can be profitable, but it's also very risky, especially if you don't have enough experience. High leverage and volatility can wipe out your entire capital in a matter of seconds. If you're determined to experiment, start with a very small amount and use capital-protection strategies.