Futures is an advanced trading tool used in traditional markets with different commodities such as gas, oil, grains, precious metals, etc. Digital assets have also become a subject for this type of trading. However, the crypto futures market is a more complex instrument compared with traditional commodities futures trading. In this article, we will discuss how to trade crypto futures and the best strategy for this type of trading.
Crypto Futures Explained
The volatile cryptocurrency market allows traders to make enormous profits. To make trading work consistent, they adhere to some strategies. A trading strategy allows a trader to understand the right time to purchase or sell assets and helps avoid emotional trading. The simplest way to trade crypto is the spot market. This tool is the most common across all crypto platforms. Spot trading implies that a trader buys coins here and now at the present price.
Some advanced crypto platforms allow complex trading tools, for example, to trade crypto futures. Unlike the spot market, futures do not imply that a trader should pay for coins and receive them immediately. Instead, the trader pays for an agreement, where one indicates the value of the asset in the future and claims his obligation to buy or sell this asset when the day comes.
The most common method for futures is “long and short”. This strategy is easy to explain:
- If the trader believes that the coin’s value should go up, he wants to sell his coins at a higher rate, so he makes an agreement for this action.
- If the trader estimates the value fall, one wants to buy coins at a low rate in the future, so he concludes an agreement for buying coins.
As you can see, the actual buying or selling of coins happens when the agreement expires.
Day Trading Crypto Futures
The best time of the day for trading is 8 AM – 4 PM, which is the period of the highest activity of traders in the market. So during that time, it is likely that trades will be executed. Use the platforms that operate 24/7, for example, the WhiteBIT exchange or Binance offer profitable conditions for futures trading.