Trading Bitcoin Futures? Recommended exchange for buying bitcoin is – Swyftx
Future trades enable you to trade currencies without physically holding the currency. Trading bitcoin futures requires means trading a futures contract for bitcoin in the stock market. Therefore, as a trader, bitcoin futures enable you to speculate on the bitcoin price in the future. When trading futures of a futures contract, you need to use an exchange agency.
The common one being the Chicago Mercantile Exchange (CME) that provides you with monthly cash settlement contracts. These cash settlement contracts mean that as the trader, you take cash instead of bitcoin upon completion or settlement of a contract.
Advantages of Trading Bitcoin Futures
One main advantage of trading bitcoin futures is that you have the option of going long or short. Going long is speculating that the future price of bitcoin will rise. Buying bitcoin futures now and expecting the price to rise enables you to make money by selling the futures contract after the price increase. On the other hand, going short is the direct opposite of going long.
Going short requires you to enter a trade by speculating that the price of a commodity will fall. Here, you sell your bitcoin and purchase another currency. If the bitcoin price falls, you have the opportunity of exchanging back your traded currency for more bitcoin. Both going long and going short can help you when trading bitcoin futures. You can enter a trade and close the contract once you’ve made your profit.
Leverage is another reason why you should consider trading bitcoin futures. Since you never get to physically hold your bitcoin when trading, you also won’t have to trade a sum of €100,000 in bitcoin. Your exchange client will help you save money through margin trading. Here, you can enter a €100,000 BTC trade with only €1,000. How is this possible?
You get to use leverage. Your trading client enables you to enter larger future positions without necessarily having the capital. When trading with leverage, it’s like you are putting down a small deposit. The small deposit is known as the margin. Most trading clients will calculate the margin by calculating the ratio of the position or transaction size to the trading capital or actual cash.
With leverage, you won’t have to worry much about losing your funds because you get to enjoy the rollover. The rollover will apply for all positions open at the exchange’s closing time of cut-off time. Here, you can pay the exchange a fee or earn from your open positions. In case you don’t want to pay or earn from the rollover, you can close your positions before the cut-off time.
Basics of Bitcoin Futures
Because bitcoin futures are traded on an exchange, you need to understand the different contract details. They include:
- All settlements are financial
- The product code is BTC
- Price quotation is always in USD
- The contract unit is 5 BTC
- All contracts are listed for six consecutive months and two Decembers
Choosing a Bitcoin Futures Exchange
Before trying to invest in bitcoin futures, you need to know the different exchange options. Through this, you can find a reliable exchange and ensure that you won’t lose your investment overnight. Picking the wrong exchange can end up being a wasted effort. Therefore, below are a few ways of picking the best bitcoin futures exchange.
Fee Structures
An exchange will have different fee structures. You need to compare the offerings of different structures to ensure that it’s easier for you to trade. Luckily, all exchanges will indicate their fee structure within their contract. Reading through the contract can allow you to know whether your investment will be fruitful. Furthermore, you can take advantage of the minor price differences to make a profit.
User Experience
Your first time trading won’t be a walk in the park. However, you need an exchange solution that will make the experience a bit easier to understand. Consider looking at the different trading options and contracts you can enter with the exchange. From here, you can determine the exchange to use when trading bitcoin futures. Consider using an exchange that will help you with your trading journey.
Authenticity and Security
Ensure that you look for an exchange that will protect you from fraud. There is no need of beginning a trade only to find out that your trading account doesn’t have any balance. Consider checking the licensing of the exchange to ensure that it’s safe to work with. Nonetheless, look through some online reviews to find some testimonials from other traders.
Buying and Selling Bitcoin
You get to trade bitcoin by matching the buy and sell orders. All of these orders are placed in an order book and the exchange removes them once the trade is complete. As an investor, you deposit your funds in any currency that’s supported by the exchange to begin trading. Furthermore, you will need to consider finding an exchange that can support credit cards, bank wire transfers, or bank account links.
With such, it’s easy to trade and have access to your funds. Furthermore, to maintain some safety when trading and have the capability of opening large positions, you should consider margin trading. Here, you can easily transact with large amounts of bitcoin without having the ensure transaction size.
Crucial Aspects of Bitcoin Futures
Futures are complex financial instruments that require you to understand what you are doing before investing or spending any money. The first thing you need to know is the expiry date of the futures. In most cases, brokers and exchanges have a three-month contract that’s settled on the third Friday of the next month.
Secondly, you need to understand the strike price. This is the price of your futures contract that’s set by the markets. Strike price necessitates for you to determine whether the bitcoin price will end up higher or lower. Note that the strike price isn’t the same as the current value of bitcoin. The strike price is the price that the exchange and markets think that the bitcoin will be worth upon the expiry of the contracts.
