Futures Trading at Binance, the only Guide you will need! In this article you will learn everything about the concept of Futures Trading on one of the most popular cryptocurrency exchanges in the world: Binance. So are you ready to learn about Futures Trading? Well lets go then!
The world of Futures trading is very similar to the world of crypto trading . In fact, In futures trading you also trade in something that resembles cryptocurrencies. There is still a essential difference in what you do with crypto trading compared to Futures trading. The main difference: when you trading in futures, you bet money on a price development or prediction, instead of purchasing the cryptos (sort of) physically.
Today we take a look at terms and issues surrounding future contracts, Binance Futures as a trading platform, leverages and a whole ‘new’ way of trading. We hope that you are ready for it. Back to the future, CryptoBuy-style! Let’s go!
Important: This article is only intended to inform you about the possibilities of Futures Trading at Binance. It is entirely up to you whether and how you decide to trade cryptocurrency. We are not financial advisors.
Today we take a closer look at futures contracts. But what exactly is Futures trading? With the video below we already lift a small corner of the veil, before we go into the depths. Ready for the future? Here we go!
- 1 What exactly is Futures Trading?
- 2 What can you go to on Binance for?
- 3 How do you create accounts with Binance?
- 4 How do you start using your Binance Futures account?
- 5 The cockpit of Binance Futures (interface)
- 6 How do you trade with your Binance Futures account?
- 7 Leverages: what are they and how do they work?
- 8 Which crypto can you trade as a future?
- 9 What are the biggest risks of futures trading?
- 10 Conclusion
What exactly is Futures Trading?
To make a joke right away: for future reference, trading futures is essentially different from trading cryptocurrencies. This difference is mainly due to the fact that when trading crypto you actually trade with cryptocurrencies that are yours.
This is different with futures trading. You bet money on a price prediction. Futures are therefore a derivative (or a derivative) of a crypto price. Futures trading is becoming quite popular for a number of important reasons. These are the following reasons:
- With futures trading you can also earn a lot of money in a declining market .
- Working with levers (leverage) considerably increases the chances of winning (and therefore also the risk!).
There are other advantages to mention, but these two are by far the most important. We will explain them in more detail.
Making money in a declining market
When you own crypto, it becomes worth more when prices rise and less when prices fall. That’s not that complex. This does mean that it is impossible to make a profit on that crypto in a bearish market (falling market). At the most you can sell everything on a price ceiling, wait for a price drop and then try to buy again at a floor price.
With futures trading you can therefore earn money in a declining market. You can bet money on the prediction of a price decline. If the price then falls, you get money for that. Conversely, you will of course lose money if the predicted price decline does not materialize and prices rise.
The leverage effect / leverage
Later in this article we will devote a full chapter to the operation and application of leverages (the leverage effect), but as a teaser we will briefly explain the explanation. In futures trading you can use a so-called leverage effect. This allows you to amplify the effects on your trades up to 125 times. This is also the reason that futures trading is generally only suitable for the more experienced crypto traders.
When you activate your leverage, that factor will be applied to every dollar of profit or loss you make. This offers enormous potential, but also entails enormous risk. It is therefore important to handle this carefully and consciously. We will of course return to the operation and settings of leverages within futures trading in detail later.
And where can you go for futures trading? Well, on our favorite exchange abroad: Binance Futures. But Binance has a lot more to offer besides futures trading. Like this…
What can you go to on Binance for?
It doesn’t hurt to have a brief overview of what is available on the Binance platform! We will not go into detail about it, but you will immediately know that there are more ‘flavors’ in addition to Binance Futures Trading and you will immediately know what they are about!
- Binance Trading – the ‘normal’ trading platform in the spot market
- Binance Peer to Peer trading – the trading platform for P2P transactions
- Binance Futures trading – what we discuss today
- Binance Savings – Getting the Equivalent of Bank Interest on Your Cryptos
- Binance Staking – Using your crypto pool for ‘staking’. This looks like a mining variant
- Binance Pool – Get extra rewards by joining a mining pool
- Margin Trading – Borrow cryptocurrencies and then trade
- Crypto Loans – Borrow cryptocurrencies to do whatever you want with it
How do you create accounts with Binance?
If you want to get started on Binance, you will of course need an account. In fact, for Binance Futures you even need an extra account. This also applies to Binance Margin trading , but we will leave that out of scope for today.
The sequence is also quite simple. If you want to get started with Futures trading on Binance, you first need a ‘normal’ Binance account and then you will have to create a Binance Futures account. Fortunately, in both cases this can be arranged fairly easily and quickly.
A ‘normal’ Binance account
Creating a ‘normal’ Binance account is very simple. Just follow these steps:
- Go to Binance’s website .
- Click on the yellow ‘Register’ button at the top right.
- Enter a (valid) email address and a strong password.
- Agree to the Terms and Conditions.
- Click on ‘Create account’.
- Enter the verification code you received by email.
- You can then deposit money, deposit crypto or purchase crypto with a credit card. You can also skip this step by clicking ‘Go to the Dashboard’ at the top right.
- Finished! Your Binance account has now been created!
A ‘futures’ Binance account
Creating a ‘futures’ Binance account is even easier than creating a ‘regular’ Binance account. Go through the following steps:
- Log in to your Binance account.
- Click on ‘Futures’ in the bar at the top.
- Click on ‘Open now’.
Are you running into something? Then take a look at this video from Binance Futures itself, about creating an account on their platform:
How do you start using your Binance Futures account?
Of course you need money to trade. When it comes to trading on Binance Futures, that means you will need to stock your account with crypto (or more specifically USDT). To do this, you will transfer funds from your ‘regular’ Binance account to your ‘futures’ Binance account. It goes like this:
- Click on ‘Transfer’ at the bottom right.
- Choose the amount of USDT you want to transfer from your Binance account to your Binance future account.
- Click on ‘Confirm transfer’.
If you experience difficulty in the process, take a look at this video from Binance where they explain how to transfer money from one Binance account to another.
The cockpit of Binance Futures (interface)
To jump right in, it makes sense to take a look at your Binance Futures screen. We also call this your cockpit. From here you can arrange practically everything that can be arranged and you can see at a glance everything you need to know to make the right choice from your (driver’s) seat in the direction of wealth.
So let’s take a look at the seemingly extremely complex interface of Binance Futures. Don’t worry, it’s okay. The screen can be briefly divided into seven different areas. We briefly explain the surfaces one by one, so that you immediately know what exactly you can find where.
Let’s go through the numbers, from top left, to bottom left, to bottom right, to top right. cape? Nice! Let’s go!
- Here you can:
- Check and adjust your leverage (default 20x).
- Checking the mark price (important to keep an eye on as liquidation is based on the mark price).
- View the expected funding rate.
- Monitor your position in the auto-deleverage queue (important to keep an eye on during periods of high volatility).
- Check various other market data, such as price and volume data from the last 24 hours.
- This is your chart. In the top right corner you can switch between the original and the integrated TradingView view. By clicking Depth you can view a real-time view of the depth of the order book.
- This is where you track your trading activity. You can switch between the different tabs to check the current status of your positions, see what your margin balance is, which orders are open and executed, and view your complete trade and transaction history for a given period.
- This is where you enter orders and switch between the different order types. Here you can also see in which transaction cost scale you fall and you can transfer balance from your Binance account.
- Here you can see the live order book data and a visualization of the order depth. You can adjust the accuracy of the order book in the dropdown menu at the top right (default 0.01).
- This is a live view of the trading activity on Binance Futures.
- By hovering your mouse over Info you can access the Futures FAQ, check historical funding percentages and see the current balance of the Insurance Fund. If you want to log out, you can do that here as well.
How do you trade with your Binance Futures account?
Now that you know exactly what to find where, it’s time to really get started trading Binance Futures! You can do this through four different types of orders. We list these four briefly and briefly explain them again.
- Trading via Limit Order
- Trading via Market Order
- Trading via Stop-Limit Order
- Trading via Stop-Market Order
Via Limit Order
A limit order is an order that you place in the order book, with which you simply indicate that you want to buy or sell a certain amount of cryptocurrency at a certain price.
This order then remains there until a counter order is available that meets the conditions you have set. By comply we mean: the cryptocurrency in question wants to buy or sell for the price you set. This usually takes seconds or minutes, but just as well months or years. This is highly dependent on the variables you specify. Of course it depends on when the conditions are right.
You can see below how a Limit order works on Binance Futures.
Via Market Order
A Market Order is actually that variant of a limit order that does not wait for a certain limit, but is simply settled immediately. With a Market Order you do not have to think about the right price, because it is determined by the market.
A market order is executed immediately, at the most favorable price at that time. So you have the guarantee of an order that will be executed immediately under the most favorable condition. As a result, you cannot plan or effectuate this at a certain price in the future and you pay an extra fee for directly executing a market order.
You can see below how a Market order works on Binance Futures.
Via a Stop-Limit Order or Stop-Market Order
The Stop-Limit Order and Stop-Market Order are basically the same as the first two options, with the big difference that the order is only placed in the order book when a certain condition (the stop price) is reached. This gives you a little more control over when a certain order is included in the order book.
Leverages: what are they and how do they work?
As promised, we have a chapter on applying leverage (the leverage effect). By using leverage you can amplify the effect on your trades. A leverage can be set between 1x and 125x on your futures trades. So suppose you set a leverage of 20x (the default setting for futures), that means that with 10 USDT you can take a position of no less than 200 USDT.
So you understand that you can quickly trade with dizzying amounts, which is why it is also important that you understand how the liquidation process behind these positions works. The larger your position, the lower the leverage you can apply. Otherwise, the smaller your position, the greater the leverage you can give. For all the information on leverages, watch Binance’s how-to video on leverage.
Which crypto can you trade as a future?
Currently, all available cryptocurrencies are linked to a USDT pairing. You will therefore see pairs such as ‘ BTC / USDT ‘, NEO / USDT and LTC / USDT. We list all possible pairs that you can trade as futures:
- ETH /USDT
- BCH /USDT
- XRP /USDT
- EOS /USDT
- TRX /USDT
- ETC /USDT
- XLM /USDT
- ADA /USDT
- BNB / USDT
- ATOM /USDT
- IOTA /USDT
- BAT /USDT
- QTUM /USDT
What are the biggest risks of futures trading?
If you have been involved in investments before, you will know that investing in investments by definition entails a certain risk. Shares, bonds, commodities, futures contracts or cryptocurrencies have a certain value at the time of purchase and this value can rise or fall. This is also known as the so-called investment risk.
Trading in government bonds or index funds is generally less risky than investing in certain stocks. Trading in stocks is often less risky than cryptocurrencies, et cetera. Of course it is less black and white than is now stated, but in general terms, the cryptocurrency market is quite volatile.
When you also start trading in futures and add a leverage factor, that risk is multiplied by your leverage factor. It is not for nothing that future trading is ideally suited for the more experienced traders. The potential is unprecedentedly high, but the same applies to the risk.
In general, the greater the risk, the greater the profit margin. And vice versa: the smaller the risk, the lower the profit margin.
It should be clear that futures trading opens up a new territory in which opportunities and threats are lurking. In any case, it offers opportunities that you would not have on the normal (spot) trading market, thanks in part to the leverage principle.
Yet trading in futures also entails a significant risk, which means that it is by no means suitable for every trader. Whether futures trading is for you is something that depends greatly on your risk profile, the experience you have gained in crypto trading and the knowledge you possess. And a good portion of luck isn’t bad either.
In any case, we hope that you are a little bit wiser than before you started the article and that you now know everything to at least make an informed decision to what extent Futures trading is for you!
Thanh Lanh Tran(1989) is Chief Editor from BitcoinUSD.com