Binance Futures Trading

In futures trading, the traders can participate in the market movements and may earn profits by going long or short on the futures contract.

By going long means you buy a futures contract with the expectation that it will rise in the coming future. Conversely, going short a cryptocurrency means betting on prices to decline in the future. To start trading on Binance Futures, the trader has to follow the below steps:

1. Deposit USDT, BUSD into the USD-M futures account as margin and other coins in COIN-M futures as margin.

2. Select the leverage level as per your preference

3. Choose the order type like buy/sell

4. Define the number of futures contracts you wish to own.

In spot trading, users only take profit when the value of the asset increases. But on the other side, futures contracts allow traders to earn profits in both ways as the value rises or falls.

Let’s understand long and short with example:

Going long on BTCUSDT

Here you entered a long position at $3000 and upon expiration; the value is settled at $3800. Here you have received a profit of ($3800 — $3000) = $800

Going short on BTCUSDT

Here, you entered a short position at $3000 and upon expiration; the value is settled at $2200. Here you have received a profit of ($3000 — $2200) = $800

So, regardless of price movements, futures trading enable a trader to participate in cryptocurrency movement. Basically, in this type of trading, the traders can borrow and trade with more than what they have. And, this is called leveraging.

Leveraging in Binance Futures

Binance Futures trading allows traders to trade with leverage where he makes use of borrowed funds from Binance to increase his trading position beyond what he could obtain from his available cash balance alone.

Let’s go through to this with an example:

For instance, a trader deposits $3000, and decides on open a trade on futures with a leverage of 5x. So, his capital is now magnified as $15,000. If he earns a profit, it will be calculated from the capital base of $15,000. And, unfortunately, if there is a loss, it will also be calculated from $15,000. So, risks are involved everywhere.’

As compared to Spot Trading, if the trader buys $2000 worth of BTC at $48,480 and BTC price increases to $62,800. Here the trader will make a profit of $587.12.

If he long on futures trading with a leverage of 5x, he will earn a profit of $2935.60 on BTC. This is around 30% profit. But if Bitcoin had fallen by 30% to 33,936, then the trader will lose 30% of his $10,000 which is more than the trader’s actual capital meaning that he will be liquidated.

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