What is Binance Futures? Explained – Binance Futures has managed to attract the attention of those who want to make high profits with low fees. Binance Futures, which has managed to reach millions of users globally, is a risky option.
In particular, the high volatility and futures transactions in cryptocurrencies allow many people to win, while causing many people to experience high financial losses.
If you are familiar with the Forex markets, you will often hear about leveraged trading. The Binance Futures platform also allows users to trade leveraged and take short/long positions through smart contracts. Let’s examine together what is Binance Futures or Binance leveraged trading!
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What is Binance Futures?
Binance futures offers traders the ability to purchase the corresponding cryptocurrency at a predetermined price at a future time. In addition, the Binance Futures platform provides leveraged trading opportunities to investors by taking short or long positions.
When you trade with Binance Futures, you are not buying a cryptocurrency. Instead, a smart contract is signed with the platform. You buy the coin determined through the smart contract when the time comes.
With futures:
- Can take a short/long position
- You can trade with leverage.
Binance futures are often used for leveraged trading. For example, let’s say you have $100 dollars in your wallet, and you bought $10 worth of coins. When you trade with X10 leverage, you are offered the opportunity to trade $1000.
If you win, you get 10 times the $100. If you lose, you will lose your $100 security deposit. To keep the position open and reduce your loss, you need to add maintenance margin. Otherwise, you will experience the liq situation that you often hear in the crypto market. When you become a Liq, your $100 will be a financial loss.
What is Binance Futures Short and Long?
Short and long positions on the Binance futures platform directly affect your earnings. A short position indicates that the relevant cryptocurrency is expected to decline in the future.
A long position, on the contrary, is the expectation that the cryptocurrency will rise. In Binance futures and other leveraged trading, short and long positions directly change earnings.
When you use the Binance futures trading platform, you open a short or long position and buy a smart contract. For example, let’s say that you start the process with a short position, thinking that the cryptocurrency will fall in the future.
If the cryptocurrency drops, you will earn as much as the leverage. However, if the cryptocurrency has risen, there will be a loss as much as the leverage ratio.
How to Open a Binance Futures Account?
Opening a Binance futures account is free and if you already have a Binance membership, you can start trading by activating the futures section. If you do not have a membership, you must be a member of the Binance platform.
Log in to the Binance website to open a Binance futures account. Click on ‘Binance Futures’ at the top and activate your futures subscription.
However, if you are using the Binance platform , futures or futures options will not be displayed. Therefore, you need to use the platform in English or other languages.
Use Binance > Derivatives / USDⓈ-M Futures to access futures.
How to Trade Binance FuturesAfter activating your membership
Binance FuturesAfter activating your membership you can start trading Binance futures. First, make sure you have a certain amount of money in your wallet.
If you do not have money in your account, you can make a deposit with a credit/debit card. When you transfer money to your spot wallet, it is possible to easily transfer to a futures wallet.
Binance futures are traded in USDT, so you should make sure you have Tether (USDT) in your wallet. You can also trade with BUSD. After completing the USDT transfer, you are ready to trade on the Binance futures platform.
One of the most important points you should pay attention to in futures transactions is the choice of margin:
- Cross (cross margin): Uses all funds in your account. The main purpose is to prevent liquidation.
- Isolated (isolated margin): Not all funds in your account are used. Position margin is isolated and intended to limit loss.
You must determine the coin, amount, position, leverage rate and order type you want to trade. Details on order types are given below.
What is Binance Futures Order Type?
Order types are important to minimize your risk or control your losses/gains. Binance offers six different order types for futures trading:
- Limit: The buying/selling prices are determined by the investor. For example, when you create an order to sell 1 BTC when Bitcoin reaches $60,000, it will be executed automatically.
- Market: Market or market orders are among the most used order types. However, transaction fees are high.
- Stop – Limit: It is one of the order types you should use to stop your loss and reduce your loss. The position is automatically closed when it falls below or exceeds the price set by the trader. Stop prices or trigger price can be set slightly higher than the selling price or slightly lower than the buy price.
- Stop – Market: It is used to reduce the risk in case the market price reaches the stop price.
- Take Profit – Limit: It is one of the most useful order types to lock in the profit you have made. The position is automatically closed when the profit rate determined by the investor is reached.
- Take Profit – Market: As in the above order type, the stop price is determined as the trigger price.
Other instructions you can use with or alternatively with order types:
- GTC (Valid Until Cancellation): Offer remains active until fulfilled or canceled by you.
- FOK (Cancel if Not Realized): It is used to execute the offer immediately. Otherwise, it will be canceled automatically.
- IOC (Cancel Remaining)
What is Liquidation?
The biggest risk of trading Binance futures is liquidation or liq. In this case, you will lose all of your money. Occurs when there is a price movement opposite to the position you entered. Hence, it is the most dangerous part of futures trading.
Liquidation occurs when the initial margin falls below the maintenance margin. In this case, you will first be sent a warning and asked to deposit money into the maintenance deposit.
When you deposit money, your position remains open and the transaction continues. However, when you do not deposit money, your position will be closed and the liq situation will occur.
What are Binance Futures Benefits?
The biggest advantage of Binance futures trading is the high rate of return. Many traders start futures trading for a leverage of x125. At the same time, Binance offers investors flexible freedom in this regard. For example, x3, x5, x10, x20 etc. You can set different leverage ratios.
Another advantage of trading futures with Binance is the reliability of the platform. In addition, since it is the largest cryptocurrency exchange in the world, the number of investors is high and the transaction volume is large.
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On the other hand, there is an insurance fund that prevents investor balances from falling below zero and ensures that winning investors can receive their earnings.
What Are the Risks of Binance Futures?
The biggest risk of the Binance futures platform is leveraged trading. Crypto, commodities, stocks etc. trading with leverage, regardless of whether or not you know, can result in you losing all your money. It is very easy to lose a large amount of money, especially in exchanges with high volatility such as crypto.
If you have not traded futures before or if you do not have detailed information about leveraged trading, you can try the Binance Futures Testnet offered by Binance. In this way, you have the opportunity to gain experience without the need to invest money.
Before trading with leverage, you should make sure that you do detailed research on the market and know the technical analysis. Especially high leveraged transactions result in financial losses for millions of people.
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