What are Futures Trade in Binance?
💸Step by step guide💸
Futures contracts are financial derivatives that obligate the parties involved to buy or sell an asset at a predetermined price and date in the future. On Binance, futures contracts are primarily offered for cryptocurrencies.
Key Features of Binance Futures:
1. Types of Contracts:
- Perpetual Contracts: These contracts don't have an expiry date and can be held indefinitely.
- Quarterly Contracts: These contracts have a specific expiry date, usually at the end of a quarterly period.
2. Leverage:
- Binance offers leverage on futures trading, which allows traders to amplify their exposure to the underlying asset with borrowed funds.
- Leverage ratios can range from 1x (no leverage) to 125x or more, depending on the asset and market conditions.
3. Margin Trading:
- Futures trading on Binance requires maintaining a margin, which is a fraction of the total trade value.
- Initial Margin: The amount required to open a position.
- Maintenance Margin: The minimum amount required to keep a position open.
4. Funding and Fees:
- Funding Fees: Paid between traders depending on the contract's premium or discount relative to the spot price.
- Trading Fees: Binance charges trading fees for futures contracts, which vary based on factors like trading volume and user VIP level.
5. Order Types:
- Market Order: Executes at the current market price.
- Limit Order: Executes at a specified price or better.
- Stop-Limit Order: Activates a limit order once a stop price is reached to manage potential losses.
Steps to Trade Futures on Binance:
1. Account Setup:
- Create an account on Binance and complete the necessary verification steps.
- Transfer funds to your futures wallet.
2. Platform Navigation:
- Access the Futures trading platform on Binance.
- Familiarize yourself with the interface, order types, and contract specifications.
3. Place an Order:
- Choose your desired cryptocurrency futures contract.
- Select leverage, order type, quantity, and price.
- Review and confirm your order.
4. Managing Positions:
- Monitor open positions, margin levels, and unrealized profit or loss.
- Set stop-loss and take-profit orders to manage risk.
5. Closing Positions:
- Close positions manually when your trading objectives are met or use automated orders.
Risks Involved:
- Market Volatility: Futures trading involves significant price volatility, potentially leading to rapid gains or losses.
- Leverage Risk: High leverage magnifies both profits and losses.
- Liquidation Risk: If your margin falls below the maintenance margin level, your position may be liquidated.
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