In September, Binance cryptocurrency exchange introduced its BTC / USDT futures trading platform, Binance Futures.
On this platform, Binance offers perpetual futures for the BTC / USDT pair, which serves as an additional product for the BTC / USDT pair on the Binance spot exchange. According to the exchange, futures contracts on BTC / USDT is only the first of many new products that will be presented on this platform in the future.
In the futures market, stock prices are not “set instantly” (in contrast to the traditional spot market). Instead, two counterparties will enter into a contracted transaction with a future date.
It is important to emphasize that there are differences between the perpetual futures contracts of Binance (as well as other platforms that offer this product) and the traditional futures market. The key difference between a perpetual futures contract and a traditional one is reflected in the name: it has no expiration date, which allows the trader to keep the position open for any time.
Today, the main futures market, the Chicago Mercantile Exchange Group (CME Group), provides traditional futures contracts (including Bitcoin), but, as Binance notes, "modern exchanges are moving towards a perpetual contract model."
There are several key concepts that traders should know in a perpetual contract:
- Mark Price. In order to avoid market manipulations and ensure that the perpetual contract matches the spot price, Binance uses the mark price to calculate unrealized profit and loss for all traders. The main component of the market price is the index, which is a basket of prices of a number of spot exchanges, weighted by their relative volume ( Binance , Huobi , OKEx , Bittrex, HitBTC, Bitfinex).
- Initial and maintenance margin. Traders should be careful about the initial (serving as collateral when opening a position) and supporting (minimum allowable amount to maintain an open position) margin. Particular attention should be paid to maintenance margins where automatic liquidation may occur. It is strongly recommended that traders close their positions above the supported margin in order to avoid higher fees from auto-liquidation.
- Financing (Funding). Payments between all longs and shorts in the perpetual futures market. The Funding Rate every 8 hours determines which party is the payer and recipient.
- Risk. Unlike the spot market, futures allow traders to place large orders without their full collateral (use leverage). This is what is called " margin trading ." At the same time, you always need to remember: the price of bitcoin can quickly rise and fall, since it is a very volatile asset, so leverage can quickly increase your profit, but at the same time it increases your risks and potential losses.
How to start trading on Binance Futures?
First of all, you need an account on Binance – the registration process on this exchange is quite simple and should not cause difficulties. Trading on Binance Futures is possible without verification of the main Binance account.
Before proceeding with real cryptocurrency trading , traders can practice on the test version of the platform – https://testnet.binancefuture.com/en/futures/BTCUSDT .
After making a deposit on the exchange, you need to transfer them to a separate futures wallet. To do this, you need to go to the official website of the Binance exchange https://www.binance.com/ and go to the futures platform – there is a Futures button in the upper navigation menu. Click on it and select the “Futures” option.
At the bottom right, under the order book, there is a separate menu with the "Open Account" button. By clicking on this button you confirm the creation of a futures account. After that, you will see a menu of orders for opening long and short positions. To start trading futures, you need to transfer USDT to your futures account.
This is pretty simple. To do this, you need to name the button "Translation". A new window will ask you how much USDT you want to transfer. Just enter the amount and click the "Confirm Transfer" button. Transfer occurs automatically and without commission; To change the direction of the transfer, you just need to click the corresponding button between the wallets.
Leverage at Binance Futures
Binance allows traders to open positions with leverage up to 125x.
In the upper left corner next to the BTC / USDT symbol there is a button for setting the shoulder. By clicking on it, you will see the following menu:
Everything is pretty simple here. The slider can be used to set any shoulder from 1x to 125x.
There are four types of orders that you can place on the platform:
- limit (the most popular type of orders, which is a purchase / sale at a price indicated by a trader),
- market (the simplest type of orders, which is an instant buy / sell at the best market price),
- stop limit (a type of limit order that is used to exit a position when a certain stop price is reached),
- take profit limit (the opposite of the stop limit, used to exit a position with profit at a certain price).
If you want to close your position, you have two options. Market closes instantly — you close at the best available market price. In contrast, closing by limit allows you to specify the price at which you want to close the position.
You should also pay attention to the commission of Binance Futures.
Read also our material: Margin trading in cryptocurrency on the Binance exchange .
Publication date 10/30/2019
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