There are several ways to join the crypto community, one of which is futures trading. This community- futures trading is dynamic and as such, has multiple ways through which we can explore it. Because Bitcoin Futures is our primary objective of this article, we will be focusing on that. We will be highlighting various ways a market participant can invest and profitably milk that market with minimum or zero loss.
To start with, the idea of futures sounds appealing to crypto community newbies simply because of the multiplied gain opportunity it presents. What they fail to undertake is that although futures multiply your potential gains, it equally multiplies your potential loss as well hence, there is a need to properly understand the market before you delve into it to avoid unnecessary mistakes that could result in complete liquidation. Now, let’s briefly look at what futures are and their relation to bitcoin.
Futures and Its Relation to Bitcoin
Futures is a contractual agreement of price between a buyer and a seller over an asset at a consensual date or time hence because we are looking at Bitcoin futures, the settlement between the buyer and seller will be in Bitcoin.
Bitcoin futures involve an agreement between a buyer and seller to buy a specific quantity of Bitcoin and accept delivery at an agreed date. Usually, the seller is obliged to make the Bitcoin provision. Also, it is important to note that in Bitcoin futures, BTC is traded publicly and it is void of customization.
How Do Bitcoin Futures Work?
To make enough profitable trades on Bitcoin futures, you must first understand how the contractual agreement works. The futures contract with respect to bitcoin allows market participants to enter the market at a structured price while also protecting them against unstable spikes in price either in an uptrend or downtrend. For instance:
According to Miss Jane’s market analysis, the price of Bitcoin will go up in the coming days. Depending on Miss Jane’s leverage and margin, she would be making an amplified gain if the market goes her way in the coming days. Also, say Miss Jane’s market analysis suggests that the market will be in a downtrend (as it has been in the last couple of weeks), and she will also make an amplified profit if the price of bitcoin continues to tank over the next couple of days
Invariably, Bitcoin futures is simply a form of trade but in bitcoin in which the future price of BTC is being predicted. These predictions are made on price speculations and personal opinions as to how the bitcoin price could behave in the future. At the end of each trade, there is a settlement and holders get the value of the contract in BTC futures or sometimes, cash depending on the product and market condition of Bitcoin at the time.
Bitcoin Futures Trading Tips For Making Profit
In recent times, bitcoin futures trading has grown in acceptance. This has consequently increased the number of market participants over time. Bitcoin futures trading is fast becoming a cash cow for many including market makers and newbie participants across the globe. This is because many see it as a simple buying and selling of BTC pathways with an end goal to make money. In Bitcoin futures, leverage trading is employed by all because of the volatility in the price of bitcoin for both long-term and short-term profit-making.
However, the market is still in its early phase with a lot of potential for wide coverage but it could be overwhelming for newbies hence, we will be highlighting some pro tips traders can employ for consistent profitable trade.
- Draft a Suitable Trading Strategy
One of the most important tips to be profitable in trading bitcoin futures is having a solid strategy and plan. Just like the popular saying that goes thus ” if you fail to plan, you are planning to fail”, the same goes for bitcoin futures. To start, you need to strongly establish a trading strategy. There are quite a handful of strategies that can be explored. Some traders are at their best with day trading while some are quite comfortable with scalping, either way, you must have a strategy that works for you and take advantage of that. The most important point to note is that strategies have pros and cons and as such, you must identify a suitable strategy for yourself. Your main goal is to make a profit so whatever strategy you deploy, make sure it is working well for you and your risk-to-reward ratio is positive.
- Understand market dynamics and do a thorough market analysis
For a market that is largely controlled by sentimental market makers, there is an increase in the inflow of crypto market participants. This means that to make a profit, you must understand how the market works, think like the manipulators of the market (the institutional traders), and always be ahead of them. You must understand that you are in the market against investors who want to take your few dollars and as such, to stay up in the market, you must always try to beat them at their game.
Also, the mistake newbies make is jumping into the market without proper analysis. Mr. Rodriguez from Spain just opens the chart, sees a little candle moving upwards, and feels the market is going up. He ends up putting his money and just as he puts his money, the candle starts going in an opposite direction. To avoid Mr. Rodriguez’s mistake, you must run the deep market analysis by employing your technical analysis skill set. Apart from that, you must always trust your instinct and leave the market to do its thing. Market Analysis will let you know when to enter and get out of the market. This is the only way you can stay ahead of the market makers.
- Avoid Overleveraging
Greed is a common phenomenon in Bitcoin futures trading. Quite a lot feel it is a “get rich quick” scheme and as such, they misuse the market amplifier – leveraging tools on futures. Leveraging amplifies your profits and on the flip side, amplifies your loss. Leveraging gives you access to a trade market 40-50 times greater than your investment, you must not let greed be your primary push in the use of leveraging. Check your investment, and portfolio size and use the leverage that matches your portfolio. This way, you stay long, profitably in the market.
- Master risk management
In Bitcoin futures, even the biggest of traders lose money. According to statistics, a lack of proper risk management amounts to about 60% of the losses in the crypto market. You can understand the market so well but without proper risk management, you can’t stay long in the market. Risk management consists of the use of stop-loss, calculation of risk to reward (R:R), profit target, and so on. With an ample understanding of risk management, you put yourself ahead of 90% of other traders in the market.
Conclusively, bitcoin futures trading sounds like a pretty simple adventure to market participants but it is in fact, deeper than how most see it hence, it is advisable you conduct Proper Market Analysis, follow our trading tips and employ proper risk management for maximized profit.