Bitcoin is a large portion of the growing digital asset market. Bitcoin futures provide investors with transparency, price discovery, and risk management capabilities. The contract will also allow individual market participants to access the bitcoin market as well as hedge any direct exposure to bitcoin pricing.
And Binance, the world’s top crypto exchange platform, lets you manage your futures trading.
Let’s learn all the details about the Binance futures, so you can easily do it on your own with our guide.
What are Bitcoin Futures?
What are the futures?
Futures are an agreement to buy or sell an asset on a specific future date at a specific price.
Once the futures contract has been entered, both parties have to buy and sell at the agreed-upon price, irrespective of what the actual market price is at the contract execution date. These contracts are negotiated and traded on a futures exchange which acts as the intermediary.
Bitcoin futures explained
Like a futures contract for a commodity or stock index, Bitcoin futures and Ethereum futures allow investors to speculate on the future price of BTC and ETH. In other words, the contract will be based on the price of BTC/ETH and speculators can place a “bet” on what they believe the price of Bitcoin will be in the future. In addition, it enables investors to speculate on the price of Bitcoin without actually having to own those coins.
Advantages of Bitcoin futures
- While Bitcoin itself remains unregulated, Bitcoin futures can be traded on regulated exchanges. This is good news for those who are concerned about the risks related to the industry’s lack of regulation.
- In areas where trading Bitcoin is banned, Bitcoin futures allow investors to still speculate on the price of Bitcoin.
- Since the futures are cash-settled, no Bitcoin wallet is required. No physical exchange of Bitcoin takes place in the transaction.
What are Binance Futures?
How does it work?
Here is a simple explanation of Binance Futures trading workflow:
- Create an account
- Deposit, buy or transfer crypto to your Futures Wallets (Transfer USDT, BNB or BTC.)
- Select Contract from multiple contracts options
- Place Order – Binance Futures offers a wide range of order types
- Manage your position – Monitor your position in real-time
Financial risks and how to mitigate them
- Market risk – Can be minimized by setting Stop-Loss orders on each trade so that positions are automatically closed before incurring bigger losses.
- Liquidity risk – Can be mitigated by trading on high-volume markets. Usually, assets with a high market capitalization value tend to be more liquid.
- Credit risk – Can be reduced by trading through a trustworthy exchange so that borrowers and lenders (or buyers and sellers) don’t need to trust each other.
- Operational risk – Investors can mitigate operational risks by diversifying their portfolio, preventing exposure to a single project or company. They may also do some research to find companies that are less likely to experience operational malfunctions.
- Systemic risk – Can also be reduced by portfolio diversification. But in this case, the diversification should involve projects with distinct proposals or companies from different industries. Preferably the ones that present a very low correlation.
Here is some data from the Binance April Trading Report:
- In April, Binance was the only exchange to report growth in derivatives volume, continuing its growth trend for the third consecutive month.
- Binance Futures saw a massive increase in open interest, soaring higher than the previous month and undoing all the lost positions shelved during the plummet in March.
- Binance recorded an all-time high of $12 billion within a 24-hour period. Likewise, Binance Futures also marked a new milestone, processing more than $10 billion in volume in the same period. BTC Futures ended the month on high as prices recorded 2 consecutive days of gains, moving by more than $1000.
- Between February 10 to March 12, open interest on Binance Futures perpetual contracts declined from $450 million to under $120 million, owing to the rush of liquidations that downed the price of Bitcoin by over 50%. However, since then the tide has turned.
- In less than two months, the OI increased by 233% from $120 million to $400 million, making a full recovery since the crash of Black Thursday.
Leveraged trading on Binance Futures
Leveraged trading, also known as margin trading or trading on margin, is a system that allows the trader to open positions much larger than his own capital. The trader needs only to invest a certain percentage of the position.
In other words, trading using leverage is trading on credit by depositing a small amount of cash and then borrowing a more substantial amount of cash.
Binance Futures allows you to manually adjust the leverage for each contract. To adjust the leverage, go to the order entry field and click on your current leverage amount (20x by default). Specify the amount of leverage by adjusting the slider, or by typing it in, and click on Confirm.
It’s worth noting that the larger the position size is, the smaller the amount of leverage is that you can use. Similarly, the smaller the position size, the larger the leverage you can use.
So, for example, if you decide to use 100 USDT with leverage of 100x, this will open a position worth $10,000 and you’d only have to post 100 USDT as a margin.
If you are a novice trader, you should carefully consider the amount of leverage that you are going to use. Higher leverage carries a higher risk of liquidation.
How to trade Bitcoin futures on Binance Futures?
How to start?
- Create Binance account
First of all, you need to register a Binance account (in case you don’t have it yet). If you decide to use our referral link to create your account, you will get a 45% kickback on all your trading operations.
- Activate your Binance Futures account
Go to Derivatives -> Futures and click on the One Now button.
- Fund your Futures account
You can transfer funds back and forth between your Exchange Wallet (the wallet that you use on Binance) and your Futures Wallet (the wallet that you use on Binance Futures).
It means that you first need to deposit money to your regular wallet and then transfer them to the Futures wallet.
To transfer funds to your Futures Wallet, click on Transfer in the bottom right corner of the Binance Futures page. Set the amount that you’d like to transfer and click on Confirm transfer. The balance of your Futures Wallet should be updated shortly.
At this point, you are all set and can proceed to your first order.
There are multiple order types that you can use:
- Limit Order
A limit order is an order that you place on the order book with a specific limit price. In this case, the trade will only be executed if the market price reaches your limit price (or better). Therefore, you may use limit orders to buy at a lower price or to sell at a higher price than the current market price.
- Market Order
A market order is an order to buy or sell at the best available current price. It is executed against the limit orders that were previously placed on the order book.
- Stop Limit Order
The stop-limit order consists of a stop price and a limit price. The stop price is simply the price that triggers the limit order, and the limit price is the price of the limit order that is triggered. This means that once your stop price has been reached, your limit order will be immediately placed on the order book.
- Stop Market Order
A stop market order uses a stop price as a trigger. When the stop price is reached, it triggers a market order instead.
- Take Profit Limit Order
Similarly to a stop-limit order, it involves a trigger price, the price that triggers the order, and a limit price, the price of the limit order that is then added to the order book. The key difference between a stop-limit order and a take profit limit order is that a take profit limit order can only be used to reduce open positions.
It is a useful tool to manage risk and lock in profit at specified price levels. It can also be used in conjunction with other order types, such as stop-limit orders, allowing you to have more control over your positions.
- Take Profit Market Order
A take profit market order uses a stop price as a trigger. When the stop price is reached, it triggers a market order. You can set a take profit market order under the Stop Market option in the order entry field.
- Trailing Stop Order
A trailing stop order helps you lock in profits while limiting the potential losses on your open positions.
Long Position – the trailing stop will move up with the price if the price goes up. However, if the price moves down, the trailing stop stops moving. If the price moves a specific percentage (called the Callback Rate) in the other direction, a sell order is issued.
Short Position – the trailing stop moves down with the market but stops moving if the market starts going up. If the price moves a specific percentage in the other direction, a buy order is issued.
The Activation Price is the price that triggers the trailing stop order. If you don’t specify the Activation Price, this will default to the current Last Price or Mark Price. You can set which price it should use as a trigger at the bottom of the order entry field.
The Callback Rate is what determines the percentage amount the trailing stop will “trail” the price. So, if you set the Callback Rate to 1%, the trailing stop will keep following the price from a 1% distance if the trade is going in your direction. If the price moves more than 1% in the opposite direction of your trade, a buy or sell order is issued (depending on the direction of your trade).
Opening a short or long position
To Open a Short position or Close a Long Position in Binance Futures following order types can be used:
- Limit Sell
- Market Sell
- Stop-Loss (Where stop price is less than the current price)
- Take profit (Where stop price is greater than the current price)
- Trailing Stop Sell
- Take profit with Trailing exit
- OSO (Bracket Order) with any of the above order as Primary/Secondary Order
- OCO (One Cancel Other) with any of the above order as Primary/Secondary Order
To open a Long position or Close a Short Position in Binance Futures following order types can be used:
- Limit Buy
- Market Buy
- Trailing Stop Buy
- Stop Buy – Price Greater than the current price
- Stop Buy – Price Less than the current price
- Stop Buy with Trailing Exit
- OSO (One Send Other) with any of the above order as Primary/Secondary Order
- OCO (One Cancel Other) with any of the above order as Primary/Secondary Order
How to manage open positions?
There are 4 tabs in the data table as shown above:
This is where you can view/manage Margin or Futures Open Positions. To immediately close any of the listed open positions click on Market to Close at the Market price or Limit to Close at a given limit price.
- Open Orders
This is where you can view/manage Open Trades. Some of the options are editing stop price in advance orders, canceling open limit order, etc.
- Order History
This is where you can view all past trades
This is where you can view/manage Email or Telegram triggers set up while placing a trade.
The Funding Rate makes sure that the price of a perpetual futures contract stays as close to the underlying asset’s (spot) price as possible. Essentially, traders are paying each other depending on their open positions. What dictates which side gets paid is determined by the difference between the perpetual futures price and the spot price.
When the Funding Rate is positive, longs pay shorts. When the Funding Rate is negative, shorts pay longs.
So what does this mean for you?
Depending on your open positions and the Funding Rates, you’ll either pay or receive funding payments. On Binance Futures, these funding payments are paid every 8 hours. You can check the time and the estimated Funding Rate of the next funding period on the top of the page, next to Mark Price.
Closing a position
If you wish to close your position, you have two options. A market close is instant, and you close at the best available spot price. In contrast, a limit close lets you specify the price at which you would like to close the position.
As you can see, the position tracker also contains a liquidation price. This is the price that, if reached, will see your position liquidated due to insufficient margin. Keep in mind that the entire amount in your futures wallet is used as collateral. Hence, if the price doesn’t go in the direction of your trade, the platform will use your remaining capital as collateral.
As soon as you hit the “Market” button, your position will be closed and you will see the funds return to your margin account.
Which coins does Binance Futures support?
You can only use the following coins for futures trading:
Binance Futures trading fee
You can review all the fees below in the table. And don’t forget that you can reduce your trading fees if you register your account via our referral link.
Why trade on Binance Futures?
Binance Futures Affiliate Program
You can also join the Binance Futures Affiliate Program to get up to a 40% base referral bonus. Here are simple requirements to join the club. You should be either:
- Crypto enthusiast with 5000+ followers on social media
- Crypto community with 500+ members
- Crypto business/organization with:
- Userbase of 2,000+
- Market analysis platform with 5,000+ daily visits.
- Industry Media Platform
- Crypto Fund
- Aggregate Trading Platform
How does the program work?
After you got approved, you can invite friends and give them a 10% discount and start earning your own money as well.
Starting out as a Binance Futures affiliate you will get a 30% base referral bonus. This means you get 20% of trading fees from the friends you invite and your friends get a 10% discount on trading fees.
When you reach 1,000 or more referrals you will be leveled up to get a 40% base referral bonus. This means you get 30% of trading fees from the friends you invite and your friends get a 10% discount on trading fees.
Is Binance futures safe?
It is one of the most secure cryptocurrency exchanges nowadays. The company is doing a great job of keeping users’ funds protected.
Even if the exchange were to get hacked, which it has in the past, Binance has introduced a so-called SAFU fund. The platform has allocated 10% of all trading fees into its Secure Assets Fund for Users (SAFU) in order to offer additional protection to users in extreme cases. Those funds are stored in a separate cold wallet.
Moreover, Binance has a very rigorous KYC process that applies to its futures exchange platform.
Binance futures is another way to do a crypto investment and get profit. The platform offers multiple types of orders for you to choose from and benefit from. Just make sure you understand the risks and watch out for signals in order to perform successful trading.