Module 5.0.0. Practical Session: Futures Trading on Binance
Presently, in the Crypto Market, there are a number of exchanges that offer futures trading. For this practical purpose, we will use Binance exchange because it is the most common and has the highest liquidity in the Crypto Market.
Binance Futures offers a broad range of crypto futures instruments, delivering to traders and investors numerous ways to enter the market.
Basically, there are two types of futures contracts available on Binance:
(1). USD-Margined Futures Contracts
This futures contract supports perpetual and delivery contracts with leverage of up to 125x and settled in USDT & BUSD. A perpetual contract, as the name implies, is a futures contract that never expires whereas a delivery contract has an expiry date.
(2). Coin-Margined Futures Contracts
This futures contract supports perpetual and delivery contracts with leverage of up to 125x and settled in cryptocurrency.
Ideally, in a bull market, long positions with COIN-margined contracts can maximize profits. Conversely, as the market turns bearish, using USDT-margined contracts to go short is a safer option to preserve your gains.
In short, COIN-margined contracts are more suited for hedging purposes. It enables miners and long-term investors to hedge the value of crypto holdings in terms of USD via short positions.
On the other hand, USDT-margined contracts are simpler to operate and do not need to hedge the margin risk like COIN-margined contracts.
For more on how to use these two types of futures contracts, visit Binance Academy in your Binance account.
5.0.1. Step-by-Step Guide on Binance Futures Trading
Trading futures contracts on Binance is not complicated. Here are the steps:
Step 1: If you do not have a Binance account yet, you can open one by clicking here: www.binance.com/en/register?ref=AB0BPSBL.
If you don’t know how to do this, see the lessons in Grade 4 of the Primary SOC.
Step 2: Secure your Binance account.
Note that you must enable Two Factor Authentication (2FA) to secure your Binance account before you start trading on futures.
If you don’t know how to do this, see the lessons in Grade 4 of the Primary SOC.
Step 3: Open a futures trading account on Binance as follows:
(A). Login to your Binance account.
(B). On Binance’s homepage, click on “Derivatives”
(C). Then click on “Binance Futures Overview”
(D). Next, you will see “Open Futures Account.” Click on “Open Account”
(E). You will be redirected to the Futures trading interface. To save 10% in trading funds, enter this Futures Referral Code: 213948749, and then click “Open Now.”
(F). This will open your Futures account with a note that says, “Welcome to Binance Futures!”
Congrats, your Binance Futures account has been created successfully.
(G). However, because of the high risk involved in futures trading, before you can proceed, a page will pop out in which Binance will request you to complete a Futures Quiz that consists of 14 questions. Once you have successfully completed the Future Quiz, you are ready to fund your account and start trading in futures contracts.
Step 4: Deposit funds in USDT, BUSD, or cryptocurrencies supported by Binance Futures in your Binance account. Binance Futures supports a wide range of crypto assets as collateral.
To deposit funds in your Binance account, see the lessons in Grades 6 and 7 of the Primary SOC.
Step 5: Note that when you deposit funds into your Binance account, it is actually in your fiat/spot wallet, which has to be transferred to your futures account.
To make the transfer, here are the breakdown steps:
(A). Click on “Transfer” on the right side of the Binance Futures page.
(B). Select any of the two types of futures contracts available on Binance that you are interested in.
Remember, if you want to trade BTCUSDT perpetual contracts, select the USDT-margined Futures (USDⓈ-M) Futures. For BTCUSD coin-margined contracts, select COIN-M Futures.
(C). Insert the amount you want to transfer
(D). Follow the on-screen prompts.
Step 6: Select the appropriate leverage for your futures contract.
Step 7: Place orders according to the various order types available on Binance Futures. For starters, you can select a buy-limit or buy-market order to purchase for your first futures contract.
5.0.2. Warnings!
Futures trading can be lucrative if you have the proper knowledge and risk management techniques to avoid outsized losses. Therefore, being conversant with the basics of futures trading helps you win big in this business.
Thus, you should strategize and do due diligence before trading futures and understand both their advantages as well as their risks.