Bitcoin is the most popular cryptocurrency in the world. The coin has a long and interesting history that every trader should read. Traders that start out in the crypto industry need to begin with Bitcoin. Despite the competition, it remains the number one coin in terms of global trading.
This also means that Bitcoin is the best coin to invest in. You have likely done a lot of research into investing in Bitcoin. If that’s true, a term you have certainly heard of before is Bitcoin futures. It’s a term that’s common among trading circles. You will encounter it often as you continue to learn about crypto investment.
Don’t feel alarmed if you’re not sure what Bitcoin futures are. We’re here to help you understand everything you need to know. It might seem like information overload, but there’s no pressure at all. Read through this comprehensive guide at your own pace. Once you’ve reached the end, you will know more about Bitcoin than a lot of other traders out there. Always remember that information is a powerful tool you can use to enrich yourself.
You have likely heard of some of the negatives of trading. But don’t feel dissuaded - this is often due to misinformation or lack of experience. Bitcoin trading in every shape and form can be extremely rewarding once you have an idea of what you are doing.
Let’s take a dive into Bitcoin futures and why they are so important to Bitcoin traders. If you want to learn more about cryptocurrencies, including exchange reviews and guides, we’ve got you covered.
Bitcoin Futures: What Are They?
To put it simply, Bitcoin futures are a special kind of investment. This investment gives you the opportunity to look at Bitcoin prices. But it can be done without having to own that underlying asset. What that means is that you can speculate on Bitcoin using a derivative.
Let’s look at it another way. A Bitcoin futures is a contract. It relates to an agreement to buy or sell Bitcoin at a specific time. It’s always a time and date in the future, hence the name. It’s easier to digest this information by first understanding what derivatives are. Let’s look at these derivatives now.
Bitcoin derivatives are an important aspect of futures. There are lots of different kinds, but it’s important to choose carefully. Let’s break down some of the well-known Bitcoin derivatives.
Options: An option provides the right to sell Bitcoin. But you don’t have any obligation to sell at a specific price. These derivatives have an expiration date.
Perpetual Contracts: A perpetual contract consists of an agreement with no date. This is a good choice for long-term investing.
Swaps: These contracts have an expiration time and date. When they are valid, you swap money with a different party. It’s designed to generate profit for both parties.
Forwards: Forwards are a future agreement. When signed, you must settle on an asset at some point in the future.
Crypto Exchange Platforms: Which Ones To Choose
An important part of the trading process is choosing the right exchange platform. Thankfully, this is easy enough to do. You just need the right information. Let’s explore the aspects that you need to look for when choosing a platform.
Trading Fees: Paying fees is a part of trading Bitcoin. Fees are also involved in buying and selling futures. Different exchange platforms will have different fees. It’s worth checking out the various fee breakdowns. Once you have an idea of fees, you can make a better choice.
Reputation: Remember that you are putting your trust in a chosen exchange. This means that you need to use an exchange with a good reputation. Always check online reviews before settling on an exchange. For more in-depth exchange reviews, have a look here.
Various Payment Methods: Being able to cover payments is important. Which is why you should only use exchanges that support many payment methods. Always check what payment methods are offered. Bank cards and electronic transfers are extremely common. But using an online wallet system like PayPal might be more limited.
Security: Of course, you need to use an exchange that has good security. This comes in different layers. SSL encryption for the website is a necessity. But support for two-factor authentication is an excellent option. This adds a second layer of security to your accounts. Along with this, you will want to make use of a password manager. This ensures maximum protection for your crypto assets.
Verification: You will quickly find that many exchanges require verification. These are known as KYC or know-your-customer checks. The customer will need to provide a copy of their identity in some form. This might be as a driving license or a passport.
Knowing what to look for in an exchange is just one step to take. You will next need to have a look at the bigger names in the industry. Fortunately, there are many exchanges to choose from. Choose one that fits the above criteria as well as your needs. This is a list of many of the best exchanges on the market. If you want to learn about exchanges, checking out in-depth reviews is a good idea. This Binance exchange review is a great place to start.
Now we have covered the different exchanges, let’s look at how to trade Bitcoin futures.
Start by doing some research. Watch videos and read articles. The more you learn, the better equipped you will be. You will make more well-informed decisions.
Choose an exchange. Go through the above criteria to find an exchange that will work for you.
Choose the payment methods that work for you. Once you have set payment up, consider adding funds to the accounts. You can use many different coins. Or fiat currencies are also acceptable.
Most exchanges will have an option that alludes to futures trading in some way. This is your entry point to start trading Bitcoin futures.
There may even be some mock tools available. Big exchanges like Binance offer special tools that emulate a trading environment. This is a perfect way to learn without making any financial investments.
Bitcoin Futures Trading: Things To Always Remember
We have covered some of the most important information when it comes to Bitcoin futures. But that is still plenty of information to absorb. There are a few aspects of trading that you need to always keep in mind. You may even benefit from taking the following bits of information and writing them down. Having this information accessible at all times is recommended.
Volatility: Let’s start with volatility. The volatility of Bitcoin is one of its standout characteristics. The value of this specific coin tends to fluctuate a lot. And because it’s the most valuable currency, it affects the rest of the market. This means that if Bitcoin takes a dive in value, much of the market also does. Always remember that the volatility of the market affects the price and how successful your trades will be.
Contracts: Exchanges will offer different contracts. A contract is little more than a trade. Not every exchange is going to offer the futures tools that you will need. Because of this, it’s good practice to only choose exchanges that do.
Wallets: A wallet stores all your private keys. It’s vital that you keep your wallet secure. This is why you need to use strong passwords. But also remember to activate two-factor authentication. Wallets can also be online and kept locally. You are advised to keep your wallet local and backed up as appropriate. The exception here is Bitcoin futures, which a wallet is not needed for. Even if you don’t use your wallet for BTC futures, it’s a good idea to have a wallet available regardless.
Some Tips For Bitcoin Futures Trading
You are no doubt eager to start. But you won’t start seeing profits immediately. This is because trading is inherently volatile. But with the following tips, you will be able to jump ahead of the competition.
The best way to start seeing profits is by doing the necessary research. Trading is an in-depth, well-researched topic. There are thousands of online articles and crypto guides to read, podcasts to listen to, and books to research. The more that you learn about trading subjects, the stronger you will be at trading.
Strategies are important. You will need to develop strategies over time. The more strategies you develop and implement, the higher your success rate. Make sure to have a look at popular strategies. This will give you something to work from.
Tutorials are offered by many exchanges. These are guides that help you get started. Keep in mind that these guides are usually exchange-specific. Regardless, there is still much information you can learn.
Customer support is a vital service of any exchange. If you run into issues, you need to be able to contact someone to sort it out.
Watching videos on expert traders is advised. These will be traders that have seen all the highs and lows. They will have their own strategies that they rely on. Take as many notes as you can.
Many beginner traders decide to hire an expert to teach them or invest for them. As they watch profits grow, they can begin to take over from the expert. This route is more expensive, but it gives you a practical idea of how modern trading works.
It’s advised to begin with a small amount of capital. Allow it to grow organically, over time. Too many traders throw as much money into trading as possible. This doesn’t end well most of the time. Profits will need to be grown over a period of months or years.
Yes, it’s possible to exchange futures and swaps. Keep in mind, however, that not all exchanges offer this service. If this is important to you, consider using an exchange that suits this need.
Can I Use Bitcoin Bots?
Bitcoin bots are still very much in use around the world. A Bitcoin bot will allow you to trade BTC futures. Again, it’s important to keep in mind that not all exchanges offer Bitcoin bots or allow their usage.
Is A Wallet Necessary?
Wallets are important tools in many types of crypto trading. But when it comes to BTC futures, a wallet is not a necessity. This is because a futures trader doesn’t own any of the currency and doesn’t need to store keys.
What Are The Main Differences Between Options And Futures?
Bitcoin futures trades are about setting future prices. These prices are linked to buying and selling specific assets. Options vary in that you are not obliged to either buy or sell.
Can I Start With Derivative Exchanges?
Derivative exchanges might seem like too much for a beginner. But the tools you need are accessible and easy to use. Derivative trading is not difficult and has the capability of increasing your profits.
BTC futures makes for a popular trading pastime. More people than ever before are jumping into BTC futures trading. Those traders that come prepared are usually the ones that see the most success. Bitcoin continues to be the most popular coin to buy and sell in the world. Beginner traders should stick with Bitcoin trading, at least for a while. This is the perfect way to gain experience in general.
The volatility of the market is worth noting. No other coin fluctuates as much as Bitcoin. This is not inherently a bad thing, however. The volatility of the coin means that there are opportunities to make a profit. Many coins provide profits over years, but with Bitcoin it can be done sooner. BTC futures are an excellent way of making said profits.