Bitcoin Futures market came into being during December 2017.
What are Futures?.
Futures are an agreement to buy or sell an asset on a specific date in the future at a specific price at execution date. In essence you are betting on the price being higher or lower at a specified date in the future.
What are Bitcoin Futures?
Bitcoin futures are the same as above and you are simply betting on the future price of Bitcoin. There are two positions you can take, long or short.
Why do people invest in Bitcoin Futures?
Although futures are usually used to bet on the rise or fall in price on bitcoin they can also be used for other reasons.
Futures can also be used as a risk management tool to hedge against the risk of changing prices.
Often you can take a futures contract out using just the U.S Dollar and don’t actually need to own any Bitcoin making it easier and safer for many to bet on the price fluctuations without actually owning the asset.
Cautious traders use futures to gain greater protection from the natural volatility of Bitcoin.
For example, a trader may hold a lot of Bitcoin, but he believes that there will be a downturn in the price of Bitcoin (his net value in Bitcoin will go down)and decides to hold his Bitcoin but short the Bitcoin price to profit off the short term drop in price and later use that profit to buy more Bitcoin at a reduced price. Vice versa can be applied if the holder of Bitcoin believes that the price will increase and so can long Bitcoin for profit.
Where can you trade Bitcoin Futures?
At present there are two separate markets where Bitcoin can be traded.
- The first option is on selected Cryptocurrency exchanges, Bitmex and Okcoin and Coinfloor.
- The second option is on publicly regulated exchanges. CBOE’s Bitcoin Futures and the CME (The Chicago Mercantile Exchange).
Why doesn’t everyone trade Bitcoin Futures?
Bitcoin futures are more for the experienced TA and institutional investors than the average person. It is in essence gambling on the price and the easiest way to lose your money if you do not know what you are doing.
Can you trade other Cryptocurrency futures other than just Bitcoin?
Yes, if you open a Bitmex account you can also bet on the price directions of the following coins:
- Bitcoin Cash
Tips for trading Bitcoin Futures.
- Understand leverage
- How much to trade?
- Learn from your mistakes
Plan each trade very carefully! Know at which price point you will take profits or cut your loses on a losing trade.
Anyone who has used Bitmex will have seen how incredibly fast the price movement is % wise up and down once you have taken your position. Know the % you will exit a trade if it is going against you. The normal % is 10%.
You can leverage your position many times, so understand the consequences of doing this beforehand.
Once you have set your % amount for an exit point if the market goes against you set a stop-loss at that point.
Try to use just one platform rather than multiple platforms trading multiple positions.
Once you have taken a position have patience that you are correct and you always have your stop-loss to protect you anyway. Let it play out and don’t panic if your trade goes a little against you a few
seconds after you place it.
Do not trade your entire amount in your account on one trade. Test the waters, get used to the platform and always keep some money aside to trade again in the future.
Be aware of the fees for each trade. On Bitmex for example the fees can be very high depending on your trade set-up.
After each trade win or lose evaluate it and learn what works for you.