Please note that contents in my articles are not financial advice hence do your research.
Futures/leaverage trading in cryptocurrency is similar to forex trading.
It's only difference is that it involves only decentralized currencies whereas forex trading involves both Bitcoin and fiat currency pairs.
This article will serve as a beginner's guide to futures trading.
Futures trading is strictly meant for experienced traders.
It can be highly profiting but also extremely risky if done wrongly and without a trading strategy.
It involves analysing charts and knowing positions to take.
The positions always taken are the long and the short position.
The long position indicates an expected increase in price of a coin. If you open a long position,you get your profits when the market goes up but lose when it goes down.
The short position on the other hand indicates an expected decrease in the price of a coin. Opening such position gets you rewarded with decrease in the price of the coin on which you've open position on.
The rewards in futures trading is huge compared to spot trading and is the reason why crypto traders explore it's features.
Another thing worth knowing about future trading is the issue of leaverage.
Leaverage determinee the speed of gaining or losing your money. The higher the leaverage, the faster it is to lose or make profit. It is usually recommended that people with good technical analysis skill should not exceed 10x leaverage.
Assuming you open a position with $1000 using 10x leaverage, 1% increase in price of the trading pair would mean a 10% profit in a long position which means you've earned additional $100 but would also mean a 10% lose in a short position.
This therefore means that a 10% increase in price would mean that you either make ×2 your money in a long position or you get liquidated in a short position.
Unlike spot trading where you stand a chance of recovering your money after a bear season, futures trading's loses are not recovered even if prices move as you had analysed after getting liquidation.
What exactly do you need to be successful while trading futures?
First, you will be needing an improved technical analysis skill. This will enable you to determine price movement as well as setting up a good trading strategy.
It should be noted that trading strategies do fail at times, this makes it very important to set stop losses for all trades.
Another thing that's needed is the discipline of not being greedy.
You make losses when you are greedy while trading. Greed should be reduced to the barest minimum inorder to succeed in trading.
Other things that's needed to succeed will be discussed in a later article that I will create.
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GOOD LUCK INVESTING!!!
