Futures contracts have opened the doors to more traditional investors who may not be ready to allocate funds to the asset itself, but who still want to benefit from its attractive price action. The first key reason futures contracts are used by traders is because they allow an investor to amplify their profits through something called leverage.
Leverage allows an investor to put down an amount of money and gain access to a greater amount. Trading on futures markets can amplify profits more than almost any other form of short-term trading. But with that comes the opportunity to lose money very quickly. There also other benefits, too. Plus, many home offices and investors use accounting software that might not be able to process the data flows from wallets or exchanges from spot exchanges.
How to Invest In Cryptocurrencies: Bitcoin Futures - Decrypt
Futures trading on the other hand, is something most investors are familiar with. The next is understanding your leverage options. Different exchanges will offer different amounts of leverage. At AAX, you can access x leverage. Now, if you guess wrong, and the market moves the other way, you will lose the amount you put in and no more. Leverage effectively acts as a confidence indicator. The more certain you are of a movement upwards or downwards, the more leverage you would apply.
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However, the more leverage you apply the less volatility the contract will tolerate, meaning even a small diversion in price will lead to your contract being liquidated. If however, you put less leverage into a contract, there will be more room for market shifts.
Benefits of Trading Bitcoin Futures
Lastly, you need an understanding of how an exchange deals with futures contracts. Feeling comfortable? He is based in New York.
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Bitcoin Futures Trading Strategies
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