How to Trade Crypto and Bitcoin with Binance

How to Trade Crypto and Bitcoin with Binance

Imagine if you as a trader could take advantage not only when the cryptocurrency market is rising, but also when prices are falling. Trading futures contracts or crypto futures trading can be an option because it offers long or short positions. One of them is for trading crypto such as Bitcoin which is available on the Binance Futures platform.

Understand crypto trading futures and how it differs from spot trading. Then, learn how to use the Binance Futures feature for trading crypto futures.

What is Binance Futures?

In general, crypto futures trading is the trading of futures contracts, which allows traders to buy or sell crypto assets in the future at prices according to previous agreements. These futures contracts offer the ability to take a long or short position on a crypto asset without actually purchasing it first.

As with Binance Futures, one of the benefits of futures trading is the ability to take advantage of crypto market price fluctuations without having to hold the assets themselves. Additionally, by using leverage, traders can increase their profit potential by investing only a small portion of their initial capital.

In crypto futures trading, traders can take two positions in various market conditions, viz Long (buy) position: a trader buys a futures contract in the hope that it will increase in value in the future Short (sell) position: a trader sells a futures contract in the hope that its price will fall in the future.

 

1. How to Trade Crypto Futures on Binance

First of all, to start trading crypto futures on Binance, of course, you must have a Binance account. Start registering and verifying your identity.

As with crypto exchanges in general, you need to register by entering personal data such as name, email, and cellphone number. Then verify with your identity card.

 

2. Select Binance Futures Account Type

If you have registered and verified your data, you can select the Binance Futures platform and click Open Now.

 

3. Select Futures Contract

On the Binance Futures platform, there are various contract options ranging from BTCUSDT, ETHUSDT to ETCUSDT. So, this contract choice must be in accordance with the deposit you will make. Note that the selection of contracts on Binance in US dollars (USD) consists of two types, namely BUSD and USDT.

 

4. Deposits

To start trading, traders must have capital, namely by depositing a certain amount of funds into Binance Futures. This can also be done by transferring a balance from Binance Spot Trading.

This deposit balance is used as collateral to use the margin on Binance Futures. There are two options for margin, The first is margin in USD. You do this by depositing USDT or BUSD and selecting USD-M Futures. Because the collateral is in USDT, profits and losses are also in USDT.

Second, margin in cryptocurrencies such as bitcoin (BTC) or Ether (ETH) by choosing COIN-M Futures. For example, BTCUSD Quarterly 1225 is a contract denominated in BTC and will mature in December 2025. With Coin-M Futures, traders must have a deposit or collateral in BTC. Well, profit or loss (PnL) is also denominated in BTC.

 

5. Select Leverage and Margin Level

Traders can take leverage to reduce risk or seek multiple profits in a volatile market. When launched in 2019, leverage on Binance Futures could reach 125x. However, since 2021, the available leverage is 20x. It is important to know that the higher the leverage, the higher the risk. Hence, the larger the position, the smaller the leverage available.

Next, select the margin mode, which is currently available in two types, namely Cross Mode and Isolated Mode.

In Binance Futures, Cross Margin Mode is a way to divide the margin balance across several open positions to prevent liquidation. If there is liquidation, traders risk losing their entire margin balance and any open positions.

Then, Isolated Margin Mode in Binance Futures allows traders to manage the risk of separate positions by limiting the amount of margin on each position. If the margin ratio of a position reaches 100%, the position will be subject to liquidation. Traders can add or remove margins to trading positions using this mode.

 

6. Position Mode

Before starting trading, you can choose the position mode (Position Mode). Currently, Binance Futures supports two position modes namely One-way Mode and Hedge Mode.

With One-way mode, one contract can only hold one position in one direction. For example, a BTCUSDT contract with a Buy/Long position only.

Meanwhile, in Hedge Mode, one contract can hold two positions, namely Long and Short at the same time. This mode also allows Hedge (hedge) positions in different directions within the same contract.

 

7. Opening a Position (Place Order)

Suppose you want to trade BTC with the USDT or BUSD balance you have. In the Place Order section, write the amount of BTC you want to transact. Then select the Buy/Long or Sell/Short position.

Then, at the bottom, the cost amount in USDT will appear. Before pressing the Buy/Long or Sell/Short button, traders can select the TP/SL feature.

 

Take Profit/Stop Loss (TP/SL) feature

For more expert traders, there is a TP/SL feature, namely Take Profit and Stop Loss. You can set the price for Take Profit when the price has risen to a certain number. For example, when buying the price of 1 BTC = 11,000 USDT, you can set the automatic take profit at 12,000 USDT. Then, you can set a stop loss to limit the risk of loss to a lower number, for example, 9000 USDT. This TP/SL feature is optional and may not be used.

 

8. Closing Position

Traders can close positions (Close Position) from the Position section directly. Or, you can also use the Place Order section and select [Reduce Only] in One-way mode.

In Hedge mode, immediately click the Close tab and click the Close Short or Close Long position. Finally, press Confirm so the transaction is complete.

What is the Difference Between Binance Futures and Spot Trading?

Crypto spot trading as in Binance Spot Trading is the trading of crypto assets on the spot market, which allows traders to buy or sell crypto assets at the current price. Meanwhile, Binance Futures Trading is trading in futures contracts, which allows traders to buy or sell crypto assets in the future at prices according to previous agreements.

 

One of the main differences is that in spot trading, the trader has to physically hold the crypto asset, while in futures trading, the trader does not need to hold the asset itself. Additionally, futures trading often offers higher leverage than spot trading. Thus, allowing traders to increase their profit potential by only investing a small portion of their initial capital.

 

However, futures trading also carries greater risks than spot trading, and traders must understand those risks before commencing trading. One of the biggest risks is liquidity risk, meaning the futures market may not be liquid enough to allow traders to exit their positions easily.

 

Conclusion

Binance Futures can be a platform for traders to carry out crypto futures trading. This platform provides access for traders who want to take advantage of crypto market price fluctuations. Additionally, traders can also utilize leverage to increase their profit potential.

However, traders must understand the risks involved and carry out strict risk management to avoid unnecessary losses. Hopefully, this guide on how to trade futures on Binance is useful. Remember, always use cold hard cash and DYOR before trading crypto. Happy trading!