Kraken Futures Trading Explained – How To Trade Futures On Kraken?

Kraken is one of the known crypto exchanges in the market, and it is known for supporting over 50 different coins.

The Kraken exchange permits you to purchase, sell, and deal with competitive fees; hence, both experienced and naive crypto traders prefer to use this exchange platform irrespective of the volume of their trade.

The exchange supports spot trading at current market rates and allows cryptocurrency futures trades.

If you are a beginner who is opening the first-ever crypto trade account, Kraken is a good choice for you. Kraken offers low trading fees and access to a wide range of coins.

Here is a guide that tells you all you need to know about Kraken futures trading.

We will cover factors such as Kraken futures fees, assets on which future option is offered on the Kraken exchange, how to trade Kraken futures, how they work, and more.

What Is Kraken Futures?

It is a contract that permits you to purchase or sell an asset for a fixed price on a post-dated basis. Kraken futures investment stays in your exchange account until it is sold. This helps you to enjoy a faster buying/selling process.

Kraken Futures allow you to trade derivatives on digital assets at long and short leverage as high as 50x. If you are trading futures on Kraken, this leverage scale will help you to benefit from price swings, and you can hedge your price risk too.

Regarding trading on Kraken, you can open Kraken Futures positions through the Kraken website, or you can trade directly from the Futures trading platform.  We will explain it in detail later in the article.

You would also like to know that Kraken Futures has been operating as a credible platform for crypto traders who want to benefit from the market’s upward and downward movement.

However, the UK and AU clients who are categorized as retail are not allowed to trade on Kraken Futures.

What Are Kraken futures fees?

Kraken offers a different fee schedule for futures trading. As futures trading usually includes high volumes, exchanges like Kraken charge a lower fee.

Here is an overview of fees that you will have to pay while trading on Kraken Futures:

  • Fees on Wallet transfers

Don’t worry! Transferring funds from and to futures wallet is free on Kraken Futures.

  • Settlement fee

If you are holding a fixed Maturity contract until the settlement period, you will have to pay a taker fee.

  • Funding rate

This is not something Kraken Futures itself will charge you for.

However, all the positions opened in Perpetual contracts will be eligible for a funding rate as an unrealized profit/loss either at the end of the set funding period or when you change your net open position (whichever happens earlier).

This unrealized profit/loss settles every 4 hours.

Remember, this will be a user-to-user transfer.

So if the Average Premium is greater than zero, then for that 4 hours long period, traders owning Long positions will payout to Short positions. This will be done to incentivize more Short positions so that the price gets pushed closer to the index rate.

On the other hand, if the Average Premium is less than zero, those in Short positions (for that four hours) will have to pay out to Long positions. This will incentivize more Long positions, leading to pushing the price closer to the index rate.

Maker-taker fee: Kraken Futures charges a maker and taker fee like many other crypto exchanges. It is calculated as a percentage of the notional order value for a matched trade.

Maker Fee

  • A trade order becomes subject to the ​maker​ fee on Kraken Futures if it is not matched immediately against an order already on the order book.
  • Maker fees begin with 0.20% on stablecoin and FX pairs, 0.16% on standard trading pairs, and go as low as 0.00% based on your existing 30-day trading volume.

Taker Fee

  • A trade order is eligible for a ​taker​ fee if it is matched immediately against an order already on the order book.
  • These orders also include conditional orders like stop-loss orders and take-profit orders.
  • Taker fees start from 0.20% on stablecoin and FX pairs and can go as low as 0.00%, and 0.26% on standard trading pairs and can go as low as 0.10%.

Kraken Provides Futures On Which Assets?

Before we go ahead, and tell you the types of assets on which Kraken offers futures, you must know why you might like to consider future trading.

Trading futures can be beneficial in many ways:

  • They allow benefits from price increment as well as a decline in price.
  • Futures offer financial leverage to traders.
  • They can be utilized to hedge price risk
  • Futures come with low transaction fees

Kraken offers futures on the US Dollar price of currencies, including:

  • BTCUSD
  • ETHUSD
  • LTCUSD
  • BCHUSD
  • XRPUSD

Kraken offers futures with a perpetual, monthly, quarterly, and semiannual maturity period as shown in the below-given image:

kraken futures assets

How Does Kraken Futures Work?

As we said earlier, Kraken is a user-friendly exchange; hence, even beginners can get used to it easily and quickly.

You can open your Kraken account and start trading futures in four easy steps:

STEP 1:

Before you start trading on Kraken, Kraken makes sure you check your eligibility to open a new account.

You have to satisfy the below-given criteria to be able to unlock Kraken Futures:

As a trader, you have to have either of the following accounts:

  • Individual clients: Intermediate or Pro verified
  • Business clients: Pro verified that they have participated in the KYC update

Geographic restrictions:

Even if you are eligible for the above-mentioned criteria, make sure you meet this one as Kraken Futures are NOT available for trade-in all the regions of the world.

If you are staying in the United States as well as the following areas, you will not be able to trade Kraken Futures.

Geographic restrictions kraken

kraken Geographic restrictions

STEP 2:

Once you fit the criteria and eligibility test, you will be able to create your account successfully on Kraken Futures.

Now, the next step will be to open Kraken Futures positions. You can do it directly from the Kraken website or the Futures trading platform.

From Kraken.com

  • First, you will sign in to your Kraken account normally via https://kraken.com/sign-in.
  • You will navigate yourself to the launchpad by clicking on a box of four squares next to your name.
  • Then you will have to select the Futures Trading option, and the platform will get loaded once you are ready to trade futures!

kraken sign up

From Futures.Kraken.com

Copy and paste this website link into your browser –  https://futures.kraken.com.

You will see a sign-in option in the upper-right corner; click on it.

While signing in, choose “Sign in with Kraken SSO.”

This way, you will sign in to your Kraken account, and when the trading platform loads, you are ready to trade futures!

Terms of Service

However, before you start trading Kraken Futures, make sure you read and agree to the Kraken Futures Terms & Conditions and Privacy Policy.

STEP 3:Like most known and credible crypto exchanges, you will first have to transfer funds to your Kraken exchange account.

Make sure you also leverage market insights shared by Kraken exchange to decide the right futures trading strategy.

How To Trade Kraken Futures?

As a registered and eligible trader on Kraken, you can trade through two platforms, one through Kraken and another through Kraken Pro. Kraken Pro offers lower pricing and is available to everyone with a Kraken account.

You are suggested to choose the platform based on your cryptocurrency and active market trading experience. In any case, Kraken has a suitable platform for you.

However, if you are a beginner, you are recommended to start with the central Kraken platform. Once your profile is verified, you can easily buy cryptocurrency from a linked bank account. The process is easy, and you can seamlessly sell or convert between currencies.

STEP: 1. Create a Futures Account

First things first, you cannot start trading without creating a Futures account on Kraken. For that, you have to go to the Kraken Futures page and click on “Create Account” to get started. If you already have a futures account, you can click on “Sign In.”

Create a Futures Account kraken

STEP: 2. Open the Futures Trading Terminal

Once you sign in, you can click “Start Trading” to the Kraken futures trading terminal.

Note For You: Kraken Futures is a different platform from the spot trading platform. Its user interface is different than other exchanges, so you might take some time to get habitual to it.

The centre of this trading terminal has “TradingView-enabled” charts.

On the right of the chart, there is a section of “Order Book.” It allows you to monitor long/short trades in real-time.

Open the Futures Trading Terminal kraken

STEP: 3. Select the Contract and Trading Pair

The next step is to choose the contract type and trading pair. This can be done by going to the “Market Preview” section, as shown in the image below.

Select the Contract and Trading Pair kraken

STEP: 4. Fill out the Order Form

Once you select the contract type and order form, the next step will be to fill up the order form.

Here, you have to decide whether you want to place buy/sell order, the order type, and the leverage of your preference.

Fill out the Order Form kraken

STEP: 5. Place a Trade

Once the order form is filled, you have to click on Buy (i.e., Long) to place a buy order, or you can choose Sell (Short) to place a sell order.

Whichever order you place will be shown immediately in the “Open Orders” section until it expires.

STEP: 6. Exit a Trade

The final step is to exit a trade. Exiting a trade means placing an order that is opposite of the order you placed in the beginning. Suppose you initially placed a Long order, then a Short order will be your exit order.

That’s it. Your trade is complete. Isn’t it easy?

How Much Leverage On Futures?

You should know that Futures are extremely capital efficient. This means you can open positions with lesser money than you need to open spot trading (1x) or margin trading (3-5x).

When it comes to Kraken futures, it allows you to use up to 50x leverage on futures.

Kraken follows a margin level schedule where the margin parameters depend on your contract size.

For perpetual contracts, Kraken has 11 margin levels, and below are the margin parameters for each level.

  • Level 1: 50x
  • Level 2: 25x
  • Level 3: 17x
  • Level 4: 10x
  • Level 5: 6.7x
  • Level 6: 5x
  • Level 7: 4x
  • Level 8: 3.33x
  • Level 9: 2.5x
  • Level 10: 2x
  • Maximum:

Now, the contract size for each trade level changes as per the trading pairs.

For example, for BTCUSD users, Level 1 is under $500,000. On the other hand, for Ether, the contract size for Level 1 users is under $250,000.

What Is the Initial Margin in Kraken?

Initial margin is the specific amount of your trade balance that you initially hold in order to open a spot position on margin. The initial margin does not consider unrealized profits/losses

When you fully or partially close the position, the initial margin will reduce proportionally.

The initial margin is calculated on the funds from Kraken’s margin pool that is required to maintain an open position.

Initial Margin in Kraken

For example, suppose you buy 0.1 BTC for 5,000 USD, then you have used 5,000 USD from Kraken’s margin pool:

  • With 5X leverage, the margin used is 1,000 USD.
  • With 4X leverage, the margin used is 1,250 USD.
  • With 3X leverage, the margin used is 1,667 USD.
  • With 2X leverage, the margin used is 2,500 USD.

In the same way, if you sell 0.8 ETH for 2,400 USD, you have used 0.8 ETH from Kraken’s margin pool:

  • With 5X leverage, the margin used is 0.16 ETH.
  • With 4X leverage, the margin used is 0.2 ETH.
  • With 3X leverage, the margin used is 0.2667 ETH.
  • With 2X leverage, the margin used is 0.4 ETH.

As the Used Margin mentioned here is in terms of ETH, the USD value will depend on the ETH/USD price.

What Is Maintenance Margin in Kraken?

The maintenance margin is the account equity amount you need to avoid a margin call. If your equity is less than the maintenance margin, your open positions will be liquidated to cover the Kraken Margin Pool assets that were utilized to open the position.

  • When your margin level is 100%, the exchange will not be able to allow you to open new spot positions on margin.
  • When your used margin falls between ~40-80%, Kraken can liquidate all or a portion of your account as per its discretion.
  • When your used margin falls between ~40% or lower, liquidation is inevitable.

The liquidation process on Kraken is conducted automatically and, once begun, cannot be stopped.

When you accept the T&C of Kraken while opening an account and starting a trade, you allow Kraken to liquidate your funds when the above-mentioned scenarios occur.

Conclusion

Kraken Futures is the perfect exchange platform for every trader that wants to gain more through future trading activities. With up to 50x leverage, there is enough scope for every small and big trader to gain maximum by putting a minimum on stake.

Kraken allows you to perform seamless transfers between Kraken Spot and Kraken Futures markets. The flexible and responsive user interface of Kraken makes it a perfect choice for naive futures traders.

nv-author-image

Jack Bailey

I am John, a veteran trader turned into a trading coach. Especially in the realm of cryptocurrency derivatives which is now booming and expected to grow big.