Binance, which was founded in 2017, is a known cryptocurrency exchange in the crypto world. It is the largest exchange in terms of the daily trading volume.
The exchange is trusted equally by experienced and naive crypto traders as it offers great security and trading options. The exchange deals in multiple crypto pairs and maintains 100% transparency in every translation.
One of the trading types offered by Binance is future trading and we will be covering all the possible basics concerning future trading on Binance.
How To Open Binance Futures Account?
Go to the Binance homepage, and click on Derivatives. Or you can also visit the Futures Trading page directly.
If you are already a Binance user, all you have to do is log in. In case you are new to the exchange platform, you will have to register yourself and make an account which will not take more than a few minutes.
Once you log in, you have to click on “Open Account” as shown in the image below.
The exchange will direct you to the futures trading page and click “Open Now” to open the futures account as shown in the image below. In case you have a referral code, you can mention that and then tap on “Open Now”.
Here, you have successfully created your Binance futures trading account.
Now, in order to start the actual trade, you will have to fund your Binance account.
Note for you: You will have to verify your profile with 2FA authentication process before opening a futures position on Binance.
How To Fund Your Binance Futures Account
As seen above, in order to start the actual trade, you will have to fund your Binance account.
You can transfer funds from and to your Exchange Wallet and your Futures Wallet.
Here is how you can do that.
You can transfer the funds to your Futures Wallet by clicking on “Transfer” on the Binance Futures page.
Here, you will set the amount you want to transfer and click on “Confirm”.
However, this is not the only way to fund your Futures Wallet.
You can use funds in your Exchange Wallet to borrow USDT to open future trades from your Futures Wallet Balances page. However, you will have to pay this borrowed money back.
What is a Crypto Future?
Let us start with understanding what crypto futures are.
They are built to offer complete exposure to crypto without you having to own the actual cryptocurrency.
It is similar to a stock index or futures contract of commodities, where you will accept risk on that asset’s future value.
When it comes to crypto futures, they derive value from certain cryptocurrencies including Ethereum or Bitcoin. The main advantage of crypto future trading is that it provides protection against adverse crypto price changes and market volatility.
Highly volatile digital currencies enable traders to buy these assets when the value is low and sell them when the value is high.
Binance futures is a known derivative trading platform to deal in crypto futures. Crypto futures can be traded 24*7.
However, the high volatility of derivatives trading shows that you should be able to manage risks. Hence, it is crucial to learn the basics of crypto futures before you make an investment.
Basic Crypto Futures Trading Concepts
1. Funding Rates
Crypto exchanges need a system to ensure that the index and futures prices coincide consistently.
This is nothing but the funding rate.
These rates are decided based upon the difference between the price of futures and spot markets.
This is the way of making futures trading capital-efficient. Suppose, in order to buy a single Bitcoin on the spot market, you need $40,000 at the time of writing. However, while opening the future position, you can start with a small part of the cost using leverage.
When the leverage is higher, you need to put fewer funds to open a position.
3. Margin Requirements
You require an initial margin to open a futures position. It is nothing but a percentage of a futures position nominal value that has to be secured while opening a futures account.
You need to know about maintenance margin as it is the basic amount that you need to keep the position open. Your future position will get liquidated once you hit this margin limit.
How Do Crypto Futures Work?
Now that you know the basics of futures trading, you must also know how do they work. Let us understand it through one example.
Say Bill and Niel opened a Bitcoin futures position at $35,000 each. In this scenario, Bill has opened a gaining position while Niel has opened a losing position. When the position expired, the Bitcoin futures price was $40,000.
In this case, Niel, who opened a losing position, will pay the concerned exchange the loss ($40,000-$35,000 = $5,000). However, the exchange will give Bill a profit of $5,000.
Binance exchange’s futures trading platform is easy to use and its interface is supportive to both beginners and master traders. The exchange has made the interface user-friendly.
Right from registration to trading, every procedure is easy and quick. You can also access the Binance Futures testnet to check the exchange platform without risking your funds.