Futures trading is a financial tool that allows making a profit from asset price prediction. It is a kind of speculation on the future asset price based on an in-depth analysis of its historical indicators and factors that can possibly imply it.
How does crypto futures work? The parties make a contract which indicates the future coin’s price and the day in the future when they must buy or sell the coins. The party whose prediction was correct receives a profit.
How do BTC futures work?
Picking an asset for futures trading, it is important to evaluate its trade volume and market capitalization. It is not recommended to pick little-known coins whose price is incredibly volatile and largely depends on hype because, in this case, it will be difficult to forecast it. It is better to choose large and credible projects and assets with a considerable market cap, such as Bitcoin, Ethereum, etc.
Futures on bitcoin are widespread because BTC has the largest market cap and trade volume. Besides, this asset is always in demand. Even during the market downtrend, many investors buy BTC to make a profit in the long term.
Let’s see how futures work. The most common strategy for futures trading is “Long and short”. And analyze how are bitcoins made the BTC price father’s movements and decide on opening a long or a short position:
- Long means your BTC price prediction is positive; you believe the price will grow. So you make a BTC futures contract where you indicate the future price for this coin. When the contract expires, you sell your holdings at a higher price.
- Short stands for the market downtrend. You sell your bitcoins and go short, indicating the reduced price in the contract and the date when you owe to repurchase BTC. If your prediction is correct and the BTC rate really drops by the day of the expiration of the contract, you buy coins at a reduced rate.
For a better vision of how it works, you can try futures trading using a demo account on the WhiteBIT exchange. This platform offers a convenient interface and tools for successful trading.