A futures is a type of derivative. This financial instrument implies that in the future, one party must sell and the other must buy an asset on terms agreed in advance (at the time of signing the futures contract): price, term, and volume.
Thus, a futures contract is an agreement to buy or sell an asset at a fixed price in the future. The peculiarity of a futures contract is that the seller can conclude a futures contract for sale of the asset N, without owning it at the time of concluding the contract.
In fact, futures are one of the oldest financial instruments in the economy. They originate from the relationship between farmers and businessmen: According to the terms of the future contract, a farmer is obliged to sell his wheat in autumn for 10 dollars per ton, for example. If the year was good and the supply of wheat exceeded the demand for it and the price of this asset fell to 7 dollars per ton – the farmer made an additional profit of 3 dollars from each ton. But there could be the opposite situation: the year was a bad harvest, wheat rose in price to 15 dollars per ton, and in this case, the entrepreneur profited by buying wheat at a price 5 dollars per ton lower than the market price.
In today’s society, futures are very popular as an investment and speculative instrument. Thanks to futures, the speculator can increase his profits many times over.
There are two types of futures: the term futures need to be settled at a predetermined date, while the open-ended futures are not bound to any dates and are used as long as the economy is alive.
Professional traders very often use futures in their trades. And the cryptocurrency market is no exception.
Futures on Binance
One of the largest cryptocurrency exchanges, Binance, provides the opportunity to work with cryptocurrency futures. Binance has developed a very clear and convenient interface for working with futures on crypto-assets. You can sell and buy futures both in pairs with pegs to the U.S. dollar, as well as other coins, when working on this exchange.
Binance USD-M futures. Cryptocurrencies are traded in pairs with the USDT staple code, such as USDT/BTC or USDT/BNB. If you intend or are used to trading in pair with the American dollar, then Binance USD-M futures is exactly what you need. USD-M features cryptocurrency futures contracts paired with the dollar.
Binance futures COIN-M presents the ability to buy and sell contracts in pairs of coins, such as BTC/BNB, BNB/ADA, and many others.
Something About the Binance Exchange
Advantages of Binance over other cryptocurrency exchanges:
- Biggest number of trading pairs
- Lowest commissions
- Stable terminal work
- Grid trading works without bugs
- Leverage up to x125
You can trade on Binance with both isolated and cross-margin. Isolated margin is less risky than cross-margin. With cross-margining, your entire balance in your futures wallet acts as payment for all trades at once, meaning that a failure in one trade can result in forced closure of all other contracts. In case you use an isolated margin – the coverage is a limited amount for a concrete transaction: for example, your wallet has $1000, and the transaction is opened for $100 – you risk only the $100 on which you have opened the transaction.
You can use stop loss and take profit, which also have slippage protection (marker price and actual price), to minimize your trading risks.
Binance also has a “close all open trades” button, which is very important in the cryptocurrency market considering its volatility.
In addition to the above, this exchange provides various variations of tools, the use of which, helps the trader to control risks: stop-limit orders, limit orders, grid trading.
The Binance Futures terminal allows you to quickly buy long (a deal to go up) and sell short (a deal to go down). Down trading is especially convenient: if you, for example, do not want to use leverage as it is done in the margin wallet, you just choose x1 leverage and open a short without leverage.
To summarize, it is safe to say that Binance is not only the most reliable exchange at the moment, but also the most convenient and “trader-oriented”. Fast and smooth operation, reliability, minimal commissions, and a lot of tools, which allow an experienced player to keep risks under control, are undeniable pluses when working on this platform.