Complete guide to futures trading:
On Binance, 'futures' refers to the trading of cryptocurrency futures contracts, where traders can speculate on the future price of an asset, such as Bitcoin, without owning it directly. These contracts allow traders to bet on the price going up or down, using leverage, which can amplify both gains and losses.
What are futures contracts on Binance:
Buy/sell agreements:
These are agreements to buy or sell an asset at a future date for a predetermined price.
No ownership of the asset:
Unlike the spot market, in futures trading, you do not actually need to own the cryptocurrency to trade it.
Leverage:
Binance Futures allows traders to use leverage, which means they can control a larger position with less capital, amplifying potential gains but also increasing the risk of losses.
Reference price and mark price:
To avoid price manipulation, Binance uses a reference price (calculated based on data from various exchanges) and a mark price to calculate profit/loss and liquidation prices.
Types of contracts:
There are perpetual futures contracts (without an expiration date) and quarterly contracts (with an expiration date).
Why trade futures on Binance:
Profit potential:
Futures trading allows you to profit from price fluctuations in both directions (up or down).
Hedging strategies:
Can be used to protect existing investment portfolios against losses in other trades.
Diversification:
Adds a new layer of strategy and diversification to cryptocurrency investments.
Risks:
Volatility:
The cryptocurrency market is known for its volatility, which can lead to rapid losses.
Leverage:
The use of leverage can amplify both gains and losses, making futures trading riskier.
Complexity:
Futures trading can be complex for beginners, making it important to understand how it works before starting.
In summary: Futures trading on Binance allows you to trade cryptocurrency contracts with leverage, speculating on future prices without the need to own the underlying assets. While it offers profit potential, it's important to be aware of the risks associated with high volatility and the use of leverage.
