Trading is an art, and every person starts their journey with spot trading. However, when you grow your skills as a trader you understand that you can maximize your gains and minimize your risks with some innovative strategies.
Although for long-term trading, you should trade in spot markets, Futures markets can be used to:
Short sell an asset, or
Use increased leverage in a trade.
Thus, this article will show you how to use Binance Futures Contracts for the above-stated objectives. Further, the leverage allowed for these contracts is up to 20x on Binance (this limit has been reduced recently from the previous maximum leverage of 100x).
So, we will divide this guide into two sections in which we will first Short Sell a Futures Contract and in the second section, we will Long a Futures Contract.
If you don’t already have a trading account with Binance, you would need one to use the Futures Trading feature. Get your free trading account with Binance here.
Once you sign up and complete your KYC on Binance, you are good to use the Derivatives Trading feature of the exchange.
So, let us dive in and explore the new world of Futures Trading on Binance.
How to Short Crypto On Binance – A Beginner Friendly Guide
If you like to learn by watching videos, here is a video guide for the same:
In a typical transaction, you buy first and sell later. But, in Short Selling, the chronology of the transaction is flipped, where you first sell an asset and buy it later.
Short Selling is done to earn profit in a downtrend trend market. This means that when you expect the price of an asset to fall in the near future, you sell it first at a higher price and purchase it later at a lower price.
For example, Ethereum (ETH) is trading at $2,000, and you expect it to fall to $1,500 within a week. So, to make a profit through this possible downtrend, you would first short sell ETH @ $2,000 and then repurchase it @ $1,500. Through this transaction, you would earn a profit of $500 per ETH.
The steps to short sell a perpetual contract of Binance are as follows:
· Step 1 – Choose Futures Contract
Once you are on Binance
Click on “Derivatives”
Click on “USD–M Futures” (or choose any other derivative as per your discretion)
· Step 2 – Choose Pair as per your discretion – ETHUSDT
· Step 3 – Transfer funds to your Derivatives Wallet Account
Click on the “Transfer” Button
Enter the amount to be transferred from your spot wallet
Click on “Confirm”
· Step 4 – Enter order details
Choose the type of Margin (Cross or Isolated Margin) – Cross Margin
Choose leverage level (upto 20x) – 1x
Choose the type of order – Limit, Market, Stop-Limit – Limit
Enter Short Sell Price
Enter Short Sell Quantity
Click of “TP/SL” button
Enter Take Profit and Short Sell price
Click on the “Sell/Short” button
Your limit order will be placed and will be added to your active orders.
· Step 5 – View your active order (additional step)
Click on the “View” button to understand how your order will be processed
Stage 1 – You will sell ETHUSDT @ $1826
Stage 2 – Now, there are two possible scenarios as follows:
This is how you can short sell a futures contract on Binance. Now, let us understand the process of longing these futures contracts on Binance.
Steps for Longing Bitcoin or Altcoins on Binance through Futures Trading
The steps for longing are simply the reverse of the short-selling process. You first buy an asset at a lower price and then sell it later at a higher price. The price difference is your profit.
The steps to long a perpetual contract of Binance are as follows:
· Step 1 – Choose Futures Contract
Once you are on Binance
Click on “Derivatives”
Click on “USD–M Futures” (or choose any other derivative as per your discretion)
· Step 2 – Choose Pair as per your discretion – LINKUSDT
· Step 3 – Transfer funds to your Derivatives Wallet Account
Click on the “Transfer” Button
Enter the amount to be transferred from your spot wallet
Click on “Confirm”
· Step 4 – Enter order details
Choose the type of Margin (Cross or Isolated Margin) – Cross Margin
Choose leverage level (upto 20x) – 1x
Choose the type of order – Limit, Market, Stop-Limit – Limit
Enter Long Price
Enter Long Quantity
Click of “TP/SL” button
Enter Take Profit and Short Sell price
Click on the “Buy/Long” button
Your limit order will be placed and will be added to your active orders.
Conclusion: Binance Futures Trading Tutorial
So, this is how you can use the Futures Trading feature on Binance.
Please note that this article is for educational purposes only. Using Futures Contracts and Leverage is highly risky, and you should not use them without sufficient knowledge and experience. Further, to minimize your risk, you should always use a Stop Loss trigger price.
I hope you were able to have a basic understanding of futures trading. You will be able to explore many other strategies as you start using this feature.
Please provide your feedback in the comments section below and share it with your friends who would like to understand these strategies.
I will see you shortly with some exciting trading strategies.
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