WHAT IS FUTURES TRADING?

Let's keep things simple, shall we?😂

Alright, let's begin. This is the type of trading that helps you profit by predicting the future prices of assets. If you can predict the future price of say; Bitcoin, if the price moves towards your prediction, you would make money and the interesting thing is that the direction of price does not determine if you are going to make money. If price moves up and you predicted that, you would make money and if however moves down and you predicted it before it happened, you will also make money.

HOW DO I START?

To start, knowledge needs to be acquired first to avoid making avoidable mistakes. So you will not jump into trading after reading just this piece, right?😂

The first thing is to sign up on a centralised exchange like Binance or maybe Bybit and fund your futures wallet. Next would be to study the trading interface and understand everything. So let's look at a few of the terms or jargons usually seen on the futures trading interface of most exchanges

1.LONG: This is mostly shown with a green button which means to buy an asset because you are predicting that the price will rise

2.SHORT: This is mostly shown with a red button which means to sell an asset because you are predicting that the price will fall 

3.ACCOUNT BALANCE: Every futures trading platform will show you your account balance which is the money in your trading account 

4.LEVERAGE:This is another very important jargon in futures trading that can help you make a lot of money but it is also very risky. Every futures trading interface will show you leverages starting from 1x, to others and even as high as 100x. Some centralised exchanges like Bybit even offer fractional leverages, so this means you can use a leverage of 5.7x for example. 

So what does it mean to use a leverage?, well leverage helps you amplify your trading capital.

 Let's say you have $10 to enter a trade, using a 10x leverage means that you are borrowing $100 from the exchange to trade, and a 50x leverage means that you are borrowing $500, so, leverage simply multiplies your trading capital 

This might sound good to the ear but there are risks and benefits associated with using leverage. The downside is that it amplifies your losses. If you used a 10x leverage on a trading capital of $10, that means you would control $100. If you make a 10% loss on this capital, you would make a loss of $10 which would impact your account depending on the margin mode you applied. 

Let's draw the curtains here. Read part 2 so that you would understand the different margin modes available and how losses affect them.