Understanding The Mechanics Of Futures Trading
Understand the mechanics of futures trade in cryptocurrencies
The world of cryptocurrencies has exploded in recent years, with fired and fallen prices at a fast pace. One of the most popular forms of trade of these digital assets is the futures trade, which allows people to bet on their price movements before they occur. But what exactly are cryptocurrencies and how do they work? In this article, we will break down the mechanics of the futures trade in cryptocurrencies, including key concepts, strategies and risks.
What is a cryptocurrency?
A cryptocurrency is a digital or virtual currency that uses safety cryptography and is decentralized, which means that it is not controlled by any government or institution. The best known cryptocurrencies are Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC). These digital currencies operate in a network of equal to equal, allowing users to send and receive funds without the need for intermediaries.
How does the futures trade in the cryptocurrency work?
Future trade implies speculating on the price of a cryptocurrency before it really is negotiated. There are two main types of futures contracts: spot and forward. Punctual contracts involve buying or selling cryptocurrencies at their current market prices, while term contracts involve establishing a future contract to buy or sell a currency at a predetermined price.
KEY CONCEPTS IN THE TRADE OF CRIPTOMONED FUTURE
- Market hours : In the cryptocurrency trade, there are two main hours of the market: the US market (10am et) and the Tokyo market (8pm et). This is because the main exchanges such as the New York Stock Exchange (NYSE), Nasdaq and Binance are based in the United States.
- Liquidity suppliers : Liquidity suppliers, or liquidity centers, act as intermediaries between buyers and vendors in cryptocurrency futures markets. They help to match buyers and vendors when providing a platform for trade.
- Types of Orders : There are two main types of types of orders: market orders (purchase/sale to the current market price) and limit orders (establish a specific price). Market orders are executed immediately, while the limit orders cannot be executed until the market reaches the specified price.
- Margin requirements : Margin requirements vary according to the exchange and balance of the operator’s account. Some exchanges require operators to maintain a margin ratio of 2: 1 or more.
Strategies in the Cryptocurrency Futures Trade
- Trade Day
: Daily trade implies buying and selling cryptocurrencies within a single day, trying to benefit from price fluctuations.
- Swing trade : Swing trade implies maintenance positions for a longer period, usually several days or weeks, with the aim of benefiting from trends or patterns.
- Position trade : Position trade implies buying and maintaining cryptocurrencies for a prolonged period, taking advantage of its long -term trends.
- CALOPE : The scale implies making multiple small operations in a short period, trying to benefit from small price movements.
Risks in the trade of cryptocurrency futures
- Market volatility : cryptocurrency prices can fluctuate quickly and unpredictably, which makes it difficult for merchants to predict market movements.
- Liquidity risk : Liquidity suppliers cannot always fill out purchase or sale orders at the desired price, which leads to liquidity risk.
- Risk of losing money : The futures trade implies risking capital, since losses can quickly add and erode the balance of an operator’s account.
Tips for beginners
- Educate yourself : Learn about cryptocurrency markets, commercial strategies and risks before entering the market.
- Establish realistic expectations : understand that cryptocurrencies are subject to significant price changes and do not guarantee yields.
- Start with a small account
: Start with a small account to practice trade without risking too much capital.