Futures trading is a term used to refer to an investment strategy that allows one to buy and sell on credit at a predetermined time and amount. Just like in financial trading, when you are determining your future funds on a deposit placed now at low costs. Usually whatever is being traded can vary but in this article we shall go over the greatest forms of cryptocurrency, Bitcoin. Before futures trading is done, one has to enter into a legal agreement known as a futures contract. This is where you assign a broker to your account where you will trade in future benefits.

futures trading bitcoin

Usually futures contracts work in perpetuity, a future reference to the present value of your money. It moves to the underlying value associated with it and changes the price from its different rates. The rates are either premium rates or discount/ spot rates. Premium rates are high rates that will earn you profit and discount rates or the spot rates are the lowest possible rates you should start trading with to realize profit in the future.

Futures Bitcoin Trading Strategies

A common form of trading used is a type called speed trading. This is whereby long and short trades take advantage of fluctuation of prices in the market and you earn profits from it. Long trades refer to buying stock and waiting for prices to rise in the future so you can sell and earn. Like in the stock market. While short trade refers to buying and selling almost simultaneously with the knowledge of a price difference that will get you your profit. The long and short trades work together and use a simple tool called arbitrage where you pre determine the future value of a commodity, put some stake on and wait for the profit to come flowing.

Unlike normal bitcoin strategies, futures trading exerts huge leverage thereby providing a good opportunity for the traders. In lay terms, the traders do not have to invest a lot of money to benefit from the trade. Brokerage in futures trading is very advantageous as well. The commission fees you are to pay them are subsequently low to the normal fees you would pay to trade in the stock market. Besides that, you will always earn whether there is an upside or a downside in the market. This is very good for extra cautious traders.

bitcoin futures trading

Liquidity of futures trading is a strategy meant to give freedom to its traders. One can buy bitcoin at a specified spot price and sell the futures at a premium rate at any given time, there are no long procedures to follow like the normal cryptocurrency exchange process. It is all fast, one click away. In futures trading, you use BTC, this is the value of your bitcoin but it is represented by the USD you used to buy into the contract. This will allow you to trade easily and fairly in the market. Since you are getting post funded, the value you are using right now is alternatively low, this reduces your hedge risk. Many traders prefer this because you get to earn even on income that is not yours if let’s say you had borrowed a few dollars from a friend.