From the Bitrue blog.
17th January 2023 — Bitrue’s Futures products were launched in early September 2021. It has been a year and a half since then. Bitrue started with only USDT futures and later on, COIN-M based futures were added. Furthermore, Bitrue launched USDC perpetual futures last year and have become the exchange that provides most USDC futures trading pairs. This solidifies Bitrue’s positioning in the futures market among exchanges. By completing the platform with features like Rewards Center, Rebate Program, and API functions, Bitrue futures have been improving along time in offering wide range of product variety.
Futures trading may seem complicated and sophisticated for crypto investors, especially those who are new to trading, which is why we have decided to put together a simple “Ask Me Anything” session on Telegram to laydown what futures trading is all about. Joe Alexander, a Senior Associate of Bitrue Futures, joined our host Olivia on Bitrue’s official Telegram channel for the session. Joe gave the audience a better idea of what futures trading is about, explained how to execute their very first futures trade, and answered some FAQs from the community.
[Gentle Reminder: Please always bear in mind that futures trading carries a substantial risk and a possibility of losses. Past gains are not indicative of future returns. All of your margin balance may be liquidated in the event of market volatility. The information here should not be regarded as financial or investment advice from Bitrue. All trading strategies are used at your discretion and at your own risk. Bitrue will not be liable for any loss that might arise from futures trades executed by you.]
In case you missed it, here are the Q&A’s for the session:
Q1: What is Futures trading in crypto?
I would say that futures are a type of derivative contract agreement to buy or sell a specific commodity asset or security at a set future date for a set price.
I find this fact to be particularly interesting. In the past, farmers used futures contracts to avoid price fluctuations of agricultural products and to anticipate risks. Nowadays, it is mostly seen as a derivative financial product, which people use to leverage and multiply their profits or to hedge their investment risks.
In crypto, futures are regulated trading contracts that involve an agreement to purchase or sell an underlying asset at a fixed price on a certain date. It gives investors the opportunity to bet on the future price without having to actually own or handle it.
Q2: Could you please tell us the differences between Futures trading when compared to Spot trading?
Sure! For Spot trades, you can swap your cryptocurrency for fiat currency or another cryptocurrency right away by placing a buy or sell order. In contrast, futures contracts are agreements between two parties to purchase or sell a specific item at a predetermined price at a later time.
Q3: What are the advantages and disadvantages of Futures trading when compared to Spot trading?
There are three advantages of Futures trading as compared to Spot trading
#1: You can earn a larger profit from a smaller investment due to leverage options. If you can accurately predict the trend of the coin price in short-term trading or swing trades, you can easily make a profit. At Bitrue, we offer a wide range of leverage options ranging from 25 to 125x. If you trade a token on a 20x leveraged position, your profit will be 20*3% should the token see a 3% increase.
#2: It makes hedging easier. For example, if you are bullish on BTC in the long run, but worried about price fluctuations in the short run, you can open a short position in futures trading to hedge your short-term risk.
#3: You can also make profits through futures trading during the bear market. For example, regardless of market volatility, you can always open long or short positions to make profits.
However, futures trading also carries with it its own set of risks.
#1: Risk of liquidation. When your margin is below the maintenance margin rate, the position will be liquidated. If you open a long position on a token and the price of the token falls, your position may be liquidated if it falls below the maintenance margin rate. Likewise, if you open a short position on a token and the price of the token rises, your position may be liquidated.
#2: Using leverage means trading capital you don’t have. Always remember to place a stop loss. With greater profits, comes greater risk. In this case, please remember to always do your own research (DYOR) before trading, know your personal risk appetite, and be aware of the potential risks that futures trading can bring. Only trade or leverage the amount you are comfortable with.
Q4: What are the different types of Futures?
There are two types of futures.
First, we have Perpetual Futures. Perpetual futures can be traded in perpetuity, which means that they do not have an expiration date and can be held indefinitely as long as you have sufficient margin.
Then, with Quarterly Futures. In this case, the trader has the option to purchase or sell off the underlying asset at a predetermined price before a specified date (expiration date). (e .g. due at the end of March, due at the end of June)
Q5: What segments are there in Bitrue Futures?
Bitrue currently supports USDT perpetual futures, COIN-M perpetual futures, and USDC perpetual futures. As one of the very few exchanges that offers USDC perpetual futures, we support a wide range of ≥ 30 USDC trading pairs.
Q6: Another important component of futures trading is the margin. What is margin and how does it work?
Margin is the financial guarantee for the performance of a futures contract. It’s mandatory to deposit part of the total value of the specified commodity future that is bought or sold. When the user’s margin is not enough to offset the loss of the coin price (minimum maintenance margin rate), the user will be liquidated.
At Bitrue, we divide the Margin Mode into 2 types:
#1 Cross Margin, which means all funds in the user’s account can be used as margin, and
#2 Isolated margin. In this case, only the amount initially set by the user will be used as margin.
Q7: Having in mind all things we mentioned above, how to calculate the profit of your futures trading?
You can choose to long (buy)/short (short) for futures trading.
In the case of USDT futures, for instance,
Profit = (Closing price — Opening price)* No. of Positions
When you choose to long (buy), you gain profit when the value of the asset rises. When you choose to short (sell), you gain profit when the value of the asset falls. The money you earned will be transferred to the available balance of your futures account, and you can transfer it to your Bitrue spot account. From there, it can be withdrawn.
Q8: For newbie traders, how can we start trading futures at Bitrue?
For newbie traders, we have prepared a tutorial video where we explain how you can start trading futures at Bitrue. In this video, we will guide you step-by-step in making your first futures order. You can find the explanation of all the components of futures trading, including Margin Modes, Leverage, Liquidation, etc.
Just so you know, when you successfully complete your first futures on Bitrue, you can receive 10 USDT in futures trial funds. You can find it in under your Rewards Center.
Q9: Compared with other exchanges in the market, what makes Bitrue’s futures trading unique from others?
One of the things that make Bitrue stand out from the rest is that we hold Transparency to a high degree when it comes to how we operate the exchange. We also inform users of any new changes.
On the other hand, in terms of product variety, our USDC futures stood out. Its liquidity level is considered to be in the mid-upper range for Tier-1 exchanges. Also, we’d like to highlight that despite going through the bear market last year, our futures trading has been and is still growing substantially. Its growth is reflected in its ranking on CMC.
Q10: Users also asked if Bitrue Futures focus on professional traders, or does it also focus on beginners? Does Bitrue consider it easy for beginners to understand and use?
Not only does Bitrue Futures trading provide products and features that fulfills the daily trading needs of seasoned traders, it is also beginner-friendly. The user interface is simple to use and there is a thorough Futures Trading tutorial video that we have shown above. In addition, we also provide professional traders and beginners with trading strategies to preserve their asset interest.
We want to also mention our copy trading feature that will go online around March this year. It is a very beginner-friendly tool for newbies to start trading futures. You can choose to follow experienced traders and copy their operations or adjust them according to your preferences. Please stay tuned!
Q11: Why do futures prices differ from spot prices?
Futures and spot trading are entirely different types of trading. It each serves a different market and user group, resulting in a difference in pricing. Spot prices are determined by market buying and selling activities.
Futures pricing, on the other hand, is predetermined and agreed between two parties at their own accord. The pricing is a composite price index obtained through a weighted average of their trading volumes. In a sense, it reflects the future price direction of the underlying asset. Therefore, Future prices may be lower or higher than Spot prices, it may also be similar to Spot prices.
Q12: What is Auto Deleveraging (ADL) and how does it work?
I’ll have to explain it this way: When an investor’s position is forced liquidated, a reduction will be made to the positions held by the investor in the opposite direction if the forced liquidation position is not able to close in the market and the Mark Price reaches the Bankruptcy Price. When the ADL is triggered, it will automatically deleverage a selected trade with the highest profits to offset the pending liquidation order.
At Bitrue futures, the ADL is a feature that is currently under development. We will inform you as soon as we have further update on this.
Q13: When a futures position is liquidated, what price is it based on? What is the maximum leverage available?
The forced liquidation price of a futures position is based on the Mark Price. When trading futures, one should avoid opening positions at high leverages and ensure positions maintain the minimum margin to avoid losses. This is due to the fact that liquidation risks may significantly increase when there are market fluctuations.
Q14: How much funds should I leave in my account to avoid being closed or liquidated?
According to the size of your position, the user needs to always pay attention to your Margin value. To guarantee non-liquidation, we need to ensure the Margin amount is more than the minimum Maintenance Margin rate.
Q15: Currently, it is not possible to set TP/SL when opening a position in the app. Can Bitrue add this function in the future?
This feature is currently under development. It will be launched soon (the estimated launch date should be within Q1 2023). So, stay tuned!
Also, another very popular feature that has been asked a lot and is currently under development is our copy trading feature. It will go online approximately in March. We will also take into account our users’ needs when considering launching more upcoming features later in the future.
This article came directly from the Bitrue blog, found on https://bitrue.medium.com/highlights-from-bitrue-community-talks-ask-me-anything-session-futures-trading-ca47215cee6f?source=rss-c4759c9c6535——2