Futures contracts represent a useful tool for hedging with the aim of enhancing profits while the risk of losses should also be taken into account.
Futures contracts are financial instruments that allow traders and investors useful ways to reduce risk and earn higher profits.
In this article, we provide the information to help you start trading crypto futures contracts on BTSE.
What Are Futures Contracts?
Futures contracts are derived financial instruments. This means that their value depends on underlying financial assets and the investor does not really own the asset itself.
Here is a practical example: when trading BTC futures contracts you are not trading Bitcoin but a contract whose value depends on the current price of Bitcoin.
They are called “futures” because by trading these contracts, you are taking on an obligation to buy or sell them at some point in the future.
Different types of futures contracts depend on time frames. Traditional futures will be closed at a specific date; perpetual futures stay active until the trader closes the position.
BTSE offers three kinds of futures contracts based on time frames:
- Perpetual – The contract does not expire. A characteristic of this kind of contract is funding rate: according to the position opened, a trader receives or pays a certain amount of funds to align perpetual prices and index prices;
- Monthly – The contract expires on the last Friday of the month (at 8:00 a.m. UTC);
- Quarterly – The contract expires on the last Friday of the quarter (at 8:00 a.m. UTC).
You can easily find the futures markets on BTSE Futures:
Why Traders Use Futures
There are two main reasons why traders want to use futures contracts:
- Hedging: traders who have long or short positions opened on a crypto exchange like BTSE may decide to reduce risk by opening an opposite position with a futures contract;
- Leverage: futures contracts allow higher levels of leverage to allow for potentially higher capital increase – on BTSE, leverage reaches up to 100x.
How to Start Trading Crypto Futures Contracts on BTSE
Traders can start trading crypto futures on BTSE by following a few easy steps.
1. Registration and verification
The first step is registration: create an account on BTSE by entering your email and password.
You will immediately receive a verification email. After passing email verification, you will be able to deposit, withdraw and trade cryptocurrencies.
To deposit fiat currencies on BTSE, the following verifications are required:
- Credit card deposits: ID verification
- Bank transfers: proof of address (PoA) verification
2. Fund your BTSE wallet
Once verification is completed, you will be able to fund your BTSE wallet. You can fund it with crypto or fiat – credit card deposits are available with Visa or Mastercard.
3. Choose your contract and the type of order
Choose the contract you want to trade – the asset details help you understand more of its features.
On BTSE you can choose from various order types:
- Limit: A limit order allows you to set a specific price for your order to be executed. If that price or a better price is not reached, your order will not be executed.
- Market: this is the fastest type of order. You don’t need to set a price; the order will be immediately executed at market price.
- OCO: With OCO, or one cancels the other, you can set a combination of orders and when one of these is executed, the other one is automatically canceled.
- Index: In this case, the order will be executed at a fair price based on the index of the underlying asset. You can choose a percentage deviation.
4. Place your order
According to the selected order type, you’ll be able to fill in different order details:
- Limit orders will allow you to choose specific options for the time in force, to select reduce only and post only – and, of course, a limit price;
- With market orders, you can only set the size of the order, but from this section you can also choose stop, trailing stop and take profit levels,
- With OCO orders you need to set details like price, stop price and limit if you choose the last price or the market price option;
- With the Index order, you’ll need to set a minimum or maximum price, the percentage deviation, and you can choose to hide the real size of your order by using the stealth mode.
5. Avoid liquidation
BTSE always tries to avoid auto deleveraging (ADL). Auto deleveraging is considered the last resort, but let’s see what exactly can happen.
When leverage is used, traders have more capital at their disposal than the capital they really own, but to keep leverage, traders need a certain margin. When a position is not successful, the margin is always more exposed. When the margin is no longer sufficient, traders will experience a forced liquidation of their positions.
This will usually happen at market price. The point is that the system tries to avoid the bankruptcy price – that is, a price that would transform your balance into a negative balance.
But what if the bankruptcy price cannot be avoided?
BTSE established its insurance fund to add a layer of protection for users in case of an extraordinary event. But beyond that, ADL events are inevitable, and a trader may also experience the liquidation of more than one position. The best way to avoid this is to adjust leverage in advance.
How BTSE Futures Contracts Are Different
BTSE allows traders to further reduce risks and customize futures contracts, providing the innovative multi-asset margin and settlement.
Whereas most other exchanges only support trades where the margin coin and the payout are the same, BTSE allows traders to use different cryptocurrencies and to fully customize futures contracts.
This is extremely useful for setting strategies and in respect of traders’ goals. In fact, maybe you do not want to receive your payout in the same coin you are shorting, or maybe you do not want to use your main currency as your margin. For that matter, BTSE provides different options, giving you the versatility to choose.
Our aim is to create a platform that offers users the most enjoyable trading experience. If you have any feedback, please reach out to us at firstname.lastname@example.org or on Twitter @BTSEcom.
Note: BTSE Blog contents are intended solely to provide varying insights and perspectives. Unless otherwise noted, they do not represent the views of BTSE and should in no way be treated as investment advice. Markets are volatile, and trading brings rewards and risks. Trade with caution.