Posted 12 months ago | by Ben Armstrong
How to: Stay Safe in the Crypto Futures Market
Trading futures contracts can be extremely profitable. Most futures trading platforms allow you to leverage your capital, which means larger gains when you are on the right side of the trade. Conversely, a bad trade will be more expensive, which makes limiting your risk a vital part of trading futures.
As cryptos have become more popular, there has been a big surge in the number of futures trading platforms for cryptos. Many of these exchanges offer limited tools for trading and may seem complex for people who have little experience with the futures market.
Keeping Safe in the Futures Market
There are two important things that will limit your risk when trading futures. The first is knowing how much you are willing to lose, and the second is having some sort of stop-loss order to execute sales when your risk limit is reached.
One crypto futures trading platform that offers traders industry-standard trading tools is Phemex.
Phemex was designed and built by professionals who have loads of experience in both the mainstream and crypto markets. If you would like to try trading with Phemex, please click right here for a free account. It is easy to sign up, and you can also try trading with virtual tokens before you put real tokens on the line.
Crypto Futures Magnify Market Moves
It takes a lot of confidence to put on a leveraged trade, especially if you understand how quickly your losses will mount if you are wrong. Even with a small amount of leverage, say 10:1, a 5% move in the market will wipe out half of your account's value.
Many crypto futures trading platforms offer leverage of up to 100x the value of your account, but using that kind of leverage in the crypto markets is extremely risky. A very small move in the wrong direction will leave you with nothing left in your account, which is something you need to understand before you create the position.
Anticipate Losses – You Will be Wrong Sometimes
If you are new to leveraged trading, it is important to understand that it isn't buy-and-hold investing. You will have to pay to keep your positions open (as you are using borrowed money), and you may also have to deal with losses from the get-go.
Cryptos move with force, and it isn't uncommon to see BTC go up or down by 20% in a day. If you are in a leveraged position and don't have a tight stop-loss order on it, one move in the wrong direction can wipe out your entire brokerage account.
Be safe, and trade with a broker that allows you to use orders that will allow you to easily limit risk so that you cut your losing position before they knock you off the exchange. If you would like to learn more about the trading tools that Phemex offers, please click right here for more information, or to sign up for a free account!