What is Bitcoin Future Trading?
Bitcoin Future Trading is when the trader agrees with a fellow crypto trader to buy or sell Bitcoin at a later date at its current price. Futures trading is the new and exciting way that traders can make money from Bitcoin. As the market fluctuates, investors can make huge profits from Bitcoin’s upsurges and declines through long and short orders and leverage.
On the other hand, it is risky, just like any other type of investment. Making the best profit from Bitcoin futures requires getting predictions and analysis of future prices right.
How Profits Can Be Made from Future Trading
Cross Margin Trading
Cross Margin trading is when the entire margin balance of your Bitcoin is deposited across open positions as collateral to build a formidable force against liquidation.
Although in cross-margin trading, traders do risk losing their entire margin to liquidation, but there is significantly less chance of that happening if the entire margin balance is there.
Cross margin is popular as it is the easiest and most suitable for new future traders. Cross Margin is very useful in the fluctuating cryptocurrency market as most crypto holders want to hold on to the coin for the long term, so future traders can use their whole margin as collateral, trade for the future and make huge profits without owning the coin.
One other way is keeping the coins in a cold wallet. With the coins in a cold wallet, it takes a prolonged amount of time before they can be connected to the internet, making them less available for exchanges
One alternative way of making money is Future trading. The Bitcoin holder of a cold wallet can allocate simply 5 or 10% of his Bitcoin assets for future trading. The whole 10% can be used as collateral for ten times leverages. This way, the trader decreases his chances of liquidation while not risking his Bitcoin assets for future trading.
Resistance and Support trading
The highest possible price of Bitcoin that it could not go beyond is the support, while its resistance is where it can never go below — that is its lowest possible price. Therefore, trading close to any of these can make a huge profit for a futures trader.
You can put a long order when you think its price will soon hit its support. This way, you put down your coin margins as collateral, leverage from others and future trade them. When the price reaches its all-time high, you sell the Bitcoin and make your profit.
Similarly, you can put Bitcoin on a short order when it is closer to its resistance price. Doing this, you sell your Bitcoin at a better price, wait for the price to reach its resistance, and buy it back again.
This can be a very effective strategy to make a profit from futures trading when implemented well.
A whale trader can profit from Bitcoin futures by influencing the market for cascading liquidation
They start this by opening a highly leveraged position with a few Bitcoin margins. This would ensure that their leveraged position could be cancelled due to insufficient margin.
As a major Bitcoin holder, and with the volatility of the crypto market, the coin experiences great incoming liquidation in terms of the whims and caprices of Bitcoin whales. Even though they lose money on Bitcoin futures, they make it back through the liquidation they influenced with their market presence.
It is worth noting that only a major Bitcoin holder can pull off such a feat without any loss.
If you want to make a profit from Bitcoin futures, then you can follow the following steps:
- Develop a Method of Trading: finding the best method is just about creating a trading strategy that works best for you. It must fit the traders’ style, risk tolerance, short-term and long-term objectives and financial aim.
- Make a Plan: This is a detailed account of how you will trade Bitcoin futures, how you’ll enter positions, exit positions, stop loss placements, leveraged positions, and much more.
- Responsible Trading: Trading responsibly goes a long way in Bitcoin futures trading. When making decisions, you must avoid emotional trading gambling or making any irrational decisions.
- Continuous Development and Information: As the market constantly evolves, so must you as a Bitcoin futures Trader; being aware of what’s going on in the industry is very important It may also determine whether you’ll maintain an edge month compared to your counterparts or not. You can also make insights and decisions and plan for what is coming in the Bitcoin futures market.
With Bitcoin futures gaining popularity, investment banks have even approved Bitcoin futures trading.