What Is Crypto Futures Trading?
In this article, we will delve into the fundamental concepts, key features, typical cases, advantages and risks of Crypto Assets futures trading, as well as how to get started, helping you fully understand this high-leverage, highly liquid derivatives market. The article specifically uses USDT futures trading as an example, combining practical experience from mainstream exchanges such as Gate.io to provide a practical guide for readers who want to use futures for investment, hedging, or speculation.
What is futures trading
Futures trading is a derivative contract, in which the two parties agree to buy or sell the underlying assets at a pre-agreed price on a future date.
The earliest futures trading originated in the agricultural products market. Modern crypto asset futures were first introduced in December 2017 at the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME), providing investors with a compliant channel to participate in price fluctuations of digital assets such as Bitcoin.
Characteristics of cryptocurrency futures trading
Contract Type
Crypto asset futures are mainly divided into coin-settled and USDT-settled modes. Coin-settled futures require delivery of digital coins or collateralized with digital coins; while USDT-settled futures are settled at the value of USDT at expiration, without the need for actual delivery of digital assets, and at the same time, USDT-settled is also the current mainstream settlement method in the market.
Leverage and Margin
Futures trading allows traders to use leverage, typically up to 10 times, 20 times, or even 100 times, to amplify profits and risks. The exchange will set initial margin and maintenance margin based on the leverage multiple. When the account margin falls below the maintenance level, a forced liquidation will be triggered.
Trading Hours and Liquidity
The cryptocurrency futures market is usually traded 24/7 and has high liquidity, which can meet the needs of long-short two-way trading. In addition, many exchanges offer high-frequency API access to meet the needs of automated trading strategies.
Advantages and Risks
Advantages
- High capital efficiency: Through leverage, a small amount of margin can achieve multiple times the exposure of the contract value.
- Two-way trading: can go long for bullish, or short for bearish, suitable for speculation or hedging in different market environments.
- No need to actually hold coins: USDT settlement contracts avoid the hassle of wallet management and secure storage.
Risk
- Liquidation Risk: High leverage comes with high risks. Sudden market fluctuations may quickly deplete margin and lead to liquidation.
- Slippage Cost: In extreme market conditions or illiquidity, large trades may result in a larger difference between the execution price and the expected price.
- Regulatory Uncertainty: Some trading platforms are unregulated, posing risks to user fund security and legal compliance.
How to start trading crypto asset futures
- Choose compliant platforms: Prioritize mainstream trading platforms such as Gate.io, pay attention to their regulatory qualifications and security measures.
- Account opening and identity verification: Complete the identity verification process, set up two-factor authentication, and ensure the security of the account.
- Deposit and Margin Management: Understand the margin requirements for different trading pairs, and set leverage and stop-loss points according to risk preferences.
- Ordering strategy: Combine technical analysis and fundamentals to develop entry, stop loss, and take profit strategies, and use API or mobile end to monitor positions at any time.
Conclusion
Crypto asset futures trading is a high-leverage, high-liquidity investment tool suitable for investors and professional traders with risk tolerance. By selecting the platform reasonably, implementing strict risk control, and adopting scientific strategies, more opportunities can be seized in the volatile environment of the crypto market. However, one should also be cautious of market fluctuations, liquidation risks, and regulatory changes, and avoid blindly following the trend.
