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!
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