However, with all that’s been said, many still don’t understand what a Bitcoin futures contract is, so let’s find out below.
What Is A Bitcoin Futures Contract?
Bitcoin futures can be an odd concept to grasp at first, but the name is very self-explanatory.
In essence, a futures contract is an agreement. In said agreement, you commit to buying or selling a commodity at a specific time, for a specific price, yet this is not the same as trading limit or stop orders.
Using Bitcoin futures means that you will carry out the order exactly as specified.
Futures form part of derivative trading, which can be seen as betting the development of Bitcoin instead of trading current market conditions.
If an example is necessary, then you can imagine the following situation:
Bitcoin currently trades around 3,400 USD. If you think that Bitcoin’s price can reach $5,000 in five months, you’ll profit from buying BTC at $3,400 when everyone else does so at $5,000, right?
This is when the “betting” part of Bitcoin futures comes in; you can’t be completely sure if the price will be met, so if you decide to trade a Bitcoin futures for $3,400 and the price ends up sitting at $3,000 in five months, you won’t be as happy.
How Do You Trade Futures?
Trading futures first requires a broker which lets you do so. Once you’ve found it, the process in itself isn’t all that different from trading Bitcoin regularly.
First off, you’ll probably have to switch your emphasis from technical analysis to fundamental analysis. This is because you will be trading the futures of Bitcoin (no pun intended), and not the current market fluctuations.
Look at the 5m Bitcoin graph:
That’s more than enough information in mere hours; you can trade several times just by using these candles.
On the other hand, look at the monthly chart, which you’ll most likely be trading:
Not so useful now, is it?
From there, it’s easy to see why you’ll pay more attention to social and news trends than just a graph. Leave the technical side to day trading.
Differences Between Futures and Crypto Trading
Of course, the main difference is that you will be trading in the long term. You will be holding contracts for positions to be met in months; you won’t be able to trade multiple futures per day.
Another difference is that you won’t actually need to own Bitcoin, so as to bypass the lack of regulations. This also means protection from the “dangers of unregulated assets”.
And lastly, what we already mentioned: you will be much more reliant on fundamental analysis and market sentiment than on charts and graphs.
Related education and FX know-how:
Trusted FX brokers
Haven't found what you're looking for? Contact us!
Forex Education - Basics:
Free Forex eBooks:
Forex Education - FX Brokers:
Forex Education - Technical Analysis:
Forex Education - Money Management:
Forex Education - Psychology:
Forex Education - Others:
Forex Interbank Trading: