Before you take the leap into futures in crypto, it’s critical to do your research and be informed about a few key aspects. Let’s discuss the main things you should know for profitable crypto futures trading.
Table of Contents
Understanding of Crypto Trading Futures
Futures on crypto open an incredible opportunity to acquire and sell assets at a pre-set price and date, with no need to worry about the instability or unpredictability of markets. That is, you agree on a specific amount now that will be paid when the asset is sold later down the road.
Trading involves purchasing or selling futures agreements:
- When you invest in a crypto futures contract with a “long” version, it implies that you are predicting the value of the coin to rise. If your forecast is correct and prices increase, then you will make money from your investment; conversely, if current market trends move downward, then unfortunately this means losses for you.
- Contrastingly, going “short” implies that you are speculating the value of the asset will decrease in the future. If it does indeed drop, you win by profiting from this shift; conversely, if it rises, then unfortunately your losses ensue.
Learn About Cryptocurrency
Before partaking in trading crypto futures, you must be educated on the foundations. Acquire a comprehensive knowledge of how Bitcoin, Ethereum, and other altcoins function; their respective prices; as well as capitalization. Without this essential understanding, you would not possess all the essential pieces of information necessary for profitable trades.
Pick a Platform
Before launching into futures, it is imperative to learn the nuances of the platform you will be using. While there are numerous platforms available that offer this service, each has its own unique features and functionalities so make sure to become well-versed before taking off. Pay attention to the fees and penalties in trading.
Learn Technical Analysis
To aid in informed trading, it is paramount to comprehend technical research and its associated charting techniques. By studying past rate movements, you can spot profitable patterns that may offer insight into your investments.
Manage Your Risk
If you’re looking to venture into futures trading, it’s essential to be aware of the risks connected with this activity. To protect yourself and your investments, set stop-loss orders, limit the size of your positions and stay clear from overleveraging.
Keep Up With the News
Crypto markets are notorious for their instability, and news can drastically influence their value. Therefore, it is essential to stay abreast of the ongoing events that could profoundly impact the market.
Practice With a Demo Account
To ensure your success when trading with real money, it’s prudent to gain some experience in demo trading first. This allows you to become comfortable with the platform and sharpen your skills without jeopardizing any of your capital.