Futures trading is a rather special and famous feature on Binance, loved by many professional traders. So what is Binance futures trading? Futures trading how? We will find out in the article below.
What is Futures Trading?
Trading futures on Binance is the feature of trading a contract to buy or sell a certain cryptocurrency in the future on the Binance exchange. This is the distinguishing feature that distinguishes between the spot market and the futures market.
To distinguish the futures market from the spot market, you can interpret the spot cryptocurrency market on Binance as similar to the underlying stock market. When trading real stocks, you can make purchases to own shares and sell those shares only when you no longer want to hold those shares. And the spot market on Binance is a form of real cryptocurrency ownership and coin ownership, and you can use that coin as a payment method, transfer between different exchanges.
Meanwhile, futures trading is similar to when you trade stock CFDs. You do not fully own the coin, but only the contract to exchange a pair of coins. And similar to the stock CFD market, on the futures market, you can place both BUY (when uptrend) and SELL (when downtrend) orders. In addition, you can also set a stop loss, take profit or use leverage, just as you would when trading stock CFDs. Due to the use of leverage, you can trade futures with a small amount of capital. However, using leverage also means that you will face the risk of burning your account. The futures market will be riskier, not suitable for people without much experience.
Some concepts in the futures market
- Position: This is the status (Buy/Long or Sell/Short) you are taking.
- Buy/Long Position: This is where you take a Buy a coin, and when the price goes up, you’ll have a profit and a loss if the price drops.
- Sell/Short Position is your coin sale; when the price goes down, you gain and lose when the price rises.
- Initial margin: The amount used to open a position before using leverage. Example: To open a Buy/Long 1 BTC position at 30,000, an initial deposit of 300 is required and a leverage of 100 is used.
- Maintenance margin: The minimum amount required to maintain your position. If the margin balance falls below the maintenance margin, the position will be automatically liquidated.
- Liquidation: it is a forced position to be closed when the margin balance is less than the maintenance margin.
Types of Binance Futures
The futures market is divided into two main types: USD(S)-M contracts and Coin-M contracts.
Coin-M Futures: Exchange rate of a coin against USD
- Coin-M Perpetual
- Coin-M Delivery
USD(S)-M (USDT-M) Futures: the exchange rate of a coin against USDT or BUSD stablecoins
- PERPETUAL USDT
- USDT Delivery
- BUSDT Perpetual
Perpetual futures will not have an expiration date. It’s up to you to decide when to close your futures contract.
Meanwhile, delivery futures will have an expiration date set at a predetermined date in the future. By the due date, even if you don’t want your trade to be closed automatically.
Futures Trading Terms
In the futures market, there are the following types of trading orders:
- Limit: When you place an order, you will enter a price in the “Price” box; when the market reaches that price, it is not possible to execute the order.
- Market: Your order is executed as soon as it is placed at the current market price.
- Stop Limit: The order includes the stop price and the limit order. You will open a pending order at the limit price you set earlier when the market reaches the stop price.
- Stop Market: The order includes the Stop Price and the market order. When the market price reaches the stop price, you will immediately match the order with the market price.
- Trailing stop: The order will be executed at the “trigger price”, The Trailing stop order will automatically set a stop loss when the price moves in favor of the preset rate (1% or 2%). Once a new stop loss is established, the Trailing Stop order will not be corrected in the opposite direction.
- Posts only: The order will be added to the order book but not executed immediately.
Options for placing orders:
- TP/SL: Click this box to set the level to take profit, stop loss
- Orders only decrease: click on this box so that the executed order is only used to close the position and not open more positions.
TIF – mode of correspondence:
- GTC: The order is executed until it is fully matched. You can choose the default mode as GTC.
- CIO: The order is partially filled and the rest is canceled.
- FOK: the order is processed or will be canceled.
Therefore, we have covered some of the most basic concepts related to futures trading on Binance. In the following articles, you will be guided step by step on how to execute the command of the future? When to use what type of order is appropriate and profitable.