Understanding Futures Trading: Starting Guide to Cryptocurrency
In recent years, finance worlds have shown an increase in the interest of investors seeking new forms of commerce. Of the many options available, cryptocurrencies paid considerable attention due to high yield and decentralized nature. Although cryptocurrencies offer many benefits, they also have unique risks and complexities that beginners must be aware of futures trade.
What are the futures merchants?
Futures merchants will buy and sell contracts at a particular time in the future, usually before or weeks before the end of the period. In the context of the cryptocurrency trade, futures markets allow investors to speculate on the values of cryptocurrencies such as bitcoin, Ethereum and others with a set of timeframe.
Understanding the cryptocurrency
Before you get into futures trade, it is essential to understand what cryptocurrency is. Cryptocurrencies are digital or virtual currencies that use cryptography for secure financial transactions and decentralized control. Examples of popular cryptocurrencies are as follows:
- Bitcoin (BTC)
- Ethereum (ETH)
- Ripple (XRP)
Cryptocurrencies operate on a network of computers that solve complex mathematical problems, provide the network through evidence of work or idle algorithms, and validate transactions.
The most important features of cryptocurrency
- decentralized : Cryptocurrencies are decentralized, ie an unverified government or institution.
- Limited care : Most cryptocurrencies have limited coins that promote inflation.
- High Security : Transactions on the blockchain are safe and transparent thanks to cryptography and peer-to-peer communication.
Types of futures transactions
There are several futures transactions in the cryptocurrencies:
- Cash futures : These contracts are settled immediately for expiration, with cash payments equivalent to the value of the underlying asset.
- Future contracts : These contracts have the expiry date and can be replaced in cash or with other devices at a later date.
- Forwards : These are the arrangements that allow merchants to record a specific price of the cryptocurrency before determining its actual value.
Key concepts
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- Risk-Right ratio : The potential reward and the required deposit or the risk ratio.
- Usage : Use of borrowed funds to increase potential yields, but also to increase potential losses.
- Stop-Loss orders
: Automatic orders that sell a device at a particular price to limit potential losses.
Fees and commissions
In futures trade, fees and commissions change depending on the stock exchange or broker:
- Replacement fees : These may include slippage, transaction fees and other fees.
- Broker Committee : Some brokers charge higher fees for futures transactions than others.
- Financing costs : Investors have to pay funding costs when lending money from a broker company.
Popular cryptocurrency -replacement
Some popular cryptocurrencies for futures trade are as follows:
- Bitmex
- Huobi
- Coinbase Pro
- Binance Futures
Conclusion
In the Cryptocurrency market, futures trade offers many benefits, including high potential yields and diversification opportunities. However, it is essential to understand the risks involved and the treatment accordingly.
Before you get into the futures transactions with cryptocurrencies, make sure that:
- Research : Education on cryptocurrencies, futures markets and trading strategies.
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