Binance Futures: Beginner’s Guide to Trading Crypto Futures

Binance Futures: Beginner’s Guide to Trading Crypto Futures

Table of Contents

Binance Futures is one of the latest markets ExChanging the World. Binance is a relatively newer brand compared to many of its well-established counterparts, but it has managed to grow into an entire multi-layered ecosystem that is trusted worldwide. One of the main services preferred by Binancians is the futures trading platform, which allows you to trade Bitcoin and other cryptocurrencies without actually owning them.

In September 2019, Binance launched two different futures trading platforms – Binance Futures and Binance JEX Futures. The former is a proprietary futures exchange that had been built in-house. Binance JEX is a trading platform that enables the trading of crypto futures, options, and spot instruments. It was rebranded after Binance acquired the Seychelles-based company JEX.

SUBSCRIBE: Engaging Stories, Sent Occasionally. Best of Blockchain Sent to Your Inbox. Sign Up for Updates!

In the present guide, we’ll focus on Binance Futures since JEX can be accessed separately, and its features vary slightly.

To begin with it, Binance Futures look very similar to its flagship spot exchange, so the chances are that you’ll find it very familiar if you happen to be a Binancian. If you have never used Binance, you’ll have to register the spot exchange before accessing the futures trading platform.

Binance Futures requires a separate account and a separate wallet. But don’t worry – the funds can be moved between your Binance wallets and accounts very quickly.

We’ll give you step-by-step instructions on how to register and fund your Binance Futures account, but let’s quickly describe what futures are in the first place, in the case you are a newcomer.

What Are Crypto Futures?

Cryptocurrency futures are a great way to get exposure to cryptocurrencies without actually owning them. Similarly to stock or commodity futures, the crypto futures contracts allow you to bet on the future price of a cryptocurrency. Obviously, Bitcoin futures represent the most popular type of contract.

Futures contracts are part of a larger group of financial instruments called derivates, which also include options, swaps, contracts for difference (CFDs), and others.

Basically, the futures contract is an agreement between two parties to either buy or sell a cryptocurrency on a predetermined date, at a predetermined price. The contract monitors an underlying cryptocurrency like Bitcoin or Ethereum. Essentially, it is a form of bet on the future price. It allows traders to either open long positions in the case they anticipate a price increase or go short if they expect a drop in price. At the expiry date of the contract, the two parties settle, and the contract closes.

While most contracts have an expiry date, there are so-called perpetual contracts. The latter ones are similar to traditional futures but don’t have any expiry time or settlement. The price of the contract tries to simulate the spot price and trades very close to it.

Binance Future is popular, especially for its perpetual contracts. Besides this, it recently added a quarterly futures contract for the BTC/USD pair, suggesting that its expiry date is three months from the opening of the trade.

BINANCE: World’s Leading Crypto Exchange. Buy Bitcoin and Ethereum in Minutes. Join Binance for Free! (Sponsor)

The first exchange platforms to introduce Bitcoin futures were Chicago-based Cboe and CME, two of the largest derivatives exchanges in the world. This helped Bitcoin go mainstream and attract more institutional investors. In fact, those moves preceded Bitcoin’s all-time high at the end of 2017, which came about one month after the two companies launched their Bitcoin products.

Meanwhile, traditional crypto exchanges started to provide separate futures trading platforms as well, and Binance didn’t want to stay aloof from this trend. Today, Binance Futures ranks fourth by trading volume, after BitMex, OKEx, and Huobi, according to CoinGecko data.

The introduction of futures contracts made the Bitcoin market more liquid and volatile, broadening the range of price discovery potential.

Registering Binance Futures and Funding the Account

Now that you are intrigued about cryptocurrency futures, it’s time to set up an account and fund it. We’ll show you how to do this.

As mentioned, you should first register with Binance’s flagship spot platform. Just enter the site and click on “Register” on the top right corner of the screen. You’ll have to insert your email address and create a secure password. After clicking “Create Account,” go back to your email address and follow the instructions. One of the subsequent steps will be to set up the two-factor authentication feature to keep your account safe.

When you’re logged in, hover over “Derivatives” at the top of the page and click on “Perpetual Futures.” You can also go for “Quarterly Futures” – they’re both displayed on the same platform.

Binance Futures - Derivatives Market
Source: Binance Futures – Derivatives Market

Next, you’ll see a reminder that informs you about how risky futures trading might be. Click on “Open now” to activate your futures account and land on the platform.

To make your first deposit on your futures trading account, you should have some funds in your Spot Wallet on Binance (used for the spot platform). Then you can move the funds to the Futures Wallet (used for the futures trading platform).

To deposit on Binance, hover over “Wallets” on top of the page and click on “Spot Wallet.” You’ll see over one hundred cryptocurrencies in which you can deposit. Besides this, Binance recently introduced support for fiat currencies, so you can also deposit in euro, British pound, Hong Kong dollar, Russian ruble, and other currencies.

When you’re ready with the deposit, you can transfer the funds to your Futures Wallet. You have to click on “Futures Wallet” while hovering over the “Wallets” section on top of the page. Note that you’ll have to choose between two different wallet options for the perpetual and quarterly contracts.

Next, click on “Transfer” on the top right corner on the screen and move your funds from the Spot Wallet.

Binance Futures - Wallet Transfer
Source: Binance Futures – Wallet Transfer

Another option is to borrow funds for the Futures Wallet by using the funds in your Spot Wallet as collateral.

Binance Futures Interface

While the interface might seem sophisticated at first, it is well-organized and intuitive. It has four main sections, including:

Binance Futures - Trading Interface
Source: Binance Futures – Trading Interface

Main Menu

this is where you can easily switch between the perpetual contracts and quarterly contracts. Also, you can browse through useful information, including a guide on trading Binance futures, monitor the funding rate (which we’ll discuss below), and check trading data. On the right side, you can access your wallets and enter your dashboard area.

Trading Chart

the chart section displays the main chart, along with the order book and the latest trades carried out on the platform. Here you can do the following:
– Select the contract by hovering over the current contract’s name (BTCUSDT is shown by default).

  • Monitor the Mark Price (this price is important because liquidations happen based on it).
  • Check the expected Funding Rate and see how much time is left until the next funding round.
  • Monitor the main chart that shows the price action. You can switch to the TradingView chart version. Here you can perform technical analysis by adding indicators, switching between timeframes, and drawing lines. If the dark mode is not for you, click on the sun symbol to switch to the light mode.
  • Check the live order book data and the order depth.
  • Monitor the live feed of the latest transactions carried out on the platform.

Orders

the order section is where you can open long or short positions. We’ll provide you with further details about the types of orders available on Binance Futures. This is also where you can adjust your leverage (which is 20x by default) and switch between “Cross Margin” and “Isolated Margin”.

Trading Activity

This is where you can check your trading history and open positions. You can receive a full trading history for any given period.

Margin

This is where you can monitor your available funds and check the margin ratio to prevent liquidations.

What Can You Trade on Binance Futures?

Binance’s spot platform is known for its wide range of tradable crypto pairs, and the futures platform is following the same trend. Initially, Binance offered a single pair – BTC/USDT. While this is the default option, users can now trade perpetual futures for multiple pairs settled in USDT, including Ethereum, Bitcoin Cash, Ripple’s XRP, EOS, Litecoin, Tron, Ethereum Classic, Cardano’s ADA, Stellar’s XLM, Dash, Binance’s BNB, IOTA, ATOM, and many more.

Besides this, there is the quarterly future contract for the BTC/USD pair. The expiry time of this contract is 91 days from the opening of a trade.

Leverage on Binance Futures

In October 2019, Binance boosted the leverage on its main futures platform to 125x, an impressive figure that triggered many reactions on social media. Some traders suggested that such high leverage might leave traders in a danger zone as they can get exposed to unprecedented risk.

On the other side, Binance CEO Changpeng Zhao (also known as CZ), argued that his company was simply offering a wide range of options and it was traders’ responsibility to pick what they need and adjust the leverage accordingly.

If you’re not familiar with it, leverage is a concept used in margin trading. It allows traders to open positions with borrowed funds provided by a third party like the exchange itself or other traders who earn interest for lending.

Margin accounts require traders a margin, i.e. their own contribution, which is expressed in percentage. For example, if a trader has $100 and intends to spend it to open a position worth $1,000, then his margin will be 10%, and he will use a 10x leverage. This form of trading is much riskier because if the price goes against the trader, then the position will get liquidated when the margin is wasted, much sooner than if the funds weren’t borrowed.

On Binance Futures, you can manually adjust the leverage from the order section. The leverage is set at 20x by default. You can move it from 1x to 125x.

Binance Futures Order Types

Binance Futures users can customize their trading experience by selecting one of the following order types:

Limit Order

By using the limit order, you set the maximum price at which you prefer to buy or the minimum price at which you want to sell. The trade will be only executed if the price touches your limit price. Thus, you can use limit orders to buy at a lower price or sell at a higher price than the current market price.

Market Order

you can opt for the market order if you want your trade to be executed as soon as possible, preferably instantly and irrespective of the current price. When placing a market order, you will have to pay a small fee as a market taker.

Stop Limit Order

It combines a stop order and a limit order. The stop-limit will be executed at the price you specify, or better after a given stop price is reached. Once the stop price is reached, the stop-limit order turns into a limit order to either buy or sell at the limit price or better.

Stop Market Order

It combines a stop order and a market order. The stop market order uses the stop price to trigger the trade. When the stop price is reached, it automatically becomes a market order.

Take Profit Limit Order and Take Profit Market Order

These are great tools to manage risks and lock in profits of open positions at specified levels. Once those levels are achieved, your trade will automatically take the profit.

Trailing Stop

The trailing stop represents another great method to manage your open positions. This type of order also helps you lock in profits while ruling out potential losses on your open positions. Unlike Take Profit orders, trailing stops give you more freedom as the price level triggering the stop is moving in the direction of the trend, making sure that you don’t miss potential profits.

For example, in a long position, the trailing stop will move up together with the price. However, if the price starts moving down, the trailing stop ceases to move. If the price continues to move against you and travels a predetermined percentage (called the Callback Rate), a sell order is issued to exit the position.

As you can see, there is a great variety of approaches to get exposure to cryptocurrencies. But this is not all – if you use limit orders, you can go for additional instructions to handle the orders as you wish. Specifically, you can choose between either Post-Only or Time in Force (TIF) instructions. In the first case, your order will always be added to the platform’s order book first and will never execute against an existing order from the order book. You may use this option if you want to pay maker fees.

Alternatively, you can choose TIF instructions, which enable you to set the amount of time that your orders will keep active before they are executed or expired. You can pick one of these three TIF instructions:

  • GTC (Good Till Cancel) – the order will remain open until it is either filled or canceled.
  • IOC (Immediate or Cancel) – the order will execute right away (whether fully or partially). If it’s executed partially, the other portion will be canceled.
  • FOK (Fill or Kill) – the order must be executed immediately, or it won’t be executed at all.

The Funding Rate

Funding is a mechanism used in perpetual contracts. The funding rate ensures that the price of such a contract is as close to the underlying asset’s spot price as possible. Basically, traders are paying each other depending on their open positions at certain hours. The difference between the price of the perpetual contract and the spot price decides which side gets paid and which one pays.

When the funding rate is positive, traders who opened long positions pay shorts. If the funding rate is negative, shorts pay longs.

On Binance, the funding payments are done every eight hours during the day. The funding rate and the countdown time is shown right above the chart. You can also check the funding rate history of each perpetual contract by hovering over “Information” on top of the page and clicking on “Funding Rate History.

Binance Futures - Funding Rate History
Source: Binance Futures – Funding Rate History

Thus, every eight hours, you’ll either pay or receive payments depending on your open positions and the current funding rate.

How to Avoid Being Liquidated on Binance Futures

Trading on Binance Futures opens a lot of opportunities, but you should make sure to manage risks properly. While you will surely experience losses here and there, you would be interested in avoiding liquidations. They happen when your Margin Balance declines below the required Maintenance Margin. You can monitor these figures on the bottom right corner of the screen.

The Margin Balance is the balance of your Binance Futures account, which includes your unrealized Profit and Loss (PnL). Thus, your profits and losses will cause the Margin Balance to fluctuate. If you choose Cross Margin mode, this balance will be distributed among all your open orders. If you pick Isolated Margin mode, this balance can be allocated to every individual position.

The Maintenance Margin represents the minimum value required to keep your positions open. In the case of liquidation, all of your open orders are canceled.

That being said, you should simply monitor your margin figures in real-time, and you’ll definitely avoid being liquidated. Generating profits on Binance Futures is way easier thanks to a wide range of features that you can’t get on other exchanges.

COMMENT: Share Your Thoughts in the Comments (Forum Page). Join the Conversation!



Subscribe

NEWSLETTER: Engaging Stories, Sent Occasionally. Best of Blockchain Sent to Your Inbox. Sign Up for Updates!



Sponsors

BINANCE: World’s Leading Crypto Exchange. Buy Bitcoin and Ethereum in Minutes. Join Binance for Free!

COFFEE: Caffeinate our Writers. Fuel Additional Longform Research with Coffee. Buy a Cup of Coffee!



Disclaimer

CRYPTO: Cryptocurrencies are subject to high market risk. HashFeed is not responsible for any loss that may incur from cryptocurrency price fluctuations. HashFeed content may not be suitable for all users and are not obligations of HashFeed or its affiliates. HashFeed is not intended for any person in any country where such usage would be contrary to local law or regulation.

AFFILIATE: HashFeed contains affiliate links to products. We may receive a commission for purchases made through these links. Keep in mind that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. We try our best to keep things fair and balanced, in order to help you make the best choice for you.