Futures trading in cryptocurrency allows traders to speculate on price movements without owning the asset itself. It involves contracts that obligate traders to buy or sell a specific cryptocurrency at a predetermined price on a future date. This method provides opportunities for profit but also comes with significant risks.
Key Concepts in Futures Trading
1. Long Position (Buy) – A trader enters a long position when they expect the price of a cryptocurrency to rise. If the price increases, they make a profit.
2. Short Position (Sell) – A trader takes a short position when they predict the price will fall. Profit is made if the price decreases.
3. Leverage – This allows traders to control a larger position with a smaller amount of capital. For example, using 10x leverage on a $50 trade means controlling $500 worth of assets. However, higher leverage also increases risk.
4. Liquidation – This occurs when a trade moves too far against the trader’s position, causing their funds to be insufficient to maintain the trade. The position is automatically closed to prevent further losses.
5. Stop Loss – This is a risk management tool that automatically closes a trade at a predefined loss level. For example, if a short position is opened at $99,800 with a stop loss at $100,000, the trade closes when the price reaches $100,000, limiting losses.
6. Take Profit – This is an order that automatically closes a trade when a predetermined profit level is reached. For instance, if a long trade is opened at $99,800 with a take profit at $100,000, the trade closes once the price hits $100,000, securing the gains.
Step-by-Step Guide to Trading Futures
Step 1: Setting Up Your Trading
Download and install the MEXC app.
Sign up on MEXC
Step 2: Funding Your Account
Deposit USDT (minimum $5 recommended).
Transfer funds from the Spot Wallet to the Futures Wallet.
Step 3: Navigating the Futures Market
Open the “Futures” tab.
Select “USDT-M” contracts.
Choose a trading pair (e.g., BTC/USDT).
Review available pairs and select your preferred one.
Step 4: Selecting Margin Type
Click on “Isolated Margin.”
Futures trading offers two margin types: Isolated (limits risk to a single trade) and Cross (shares margin across multiple trades). For beginners, isolated margin is recommended.
Step 5: Adjusting Leverage
Click on the leverage setting (e.g., 20x dropdown arrow).
Adjust the leverage to your preferred level (10x is recommended for beginners).
Step 6: Choosing Market Type
Click the drop-down arrow beside “Market Price.”
Select “Market” to execute trades at the current price.
Step 7: Placing a Trade
Select your preferred order type and enter the trade amount.
Click “Confirm.”
Step 8: Setting Take Profit and Stop Loss
Click on TP/SL (Take Profit/Stop Loss) and ensure the checkmark is active.
Example:
Using (BTC/USDT) trading pair
For a Short Trade, enter:
Entry price: $85,300
Take profit: $84,900
Stop loss: $85,500
Click “OPEN SHORT” to start the trade.
For a Long Trade, enter:
Entry price: $85,300
Take profit: $85,700
Stop loss: $85,100
Click “OPEN LONG” to start the trade.
Important Notes on Risk Management
● Trading with high leverage increases potential profits but also exposes traders to greater risks.
● Always use Stop Loss to protect against unexpected market moves.
● Without proper risk management, liquidation is inevitable.
● Shorting newly listed airdrops can be highly profitable, but be very cautious.
My advice for a beginner will be to start off with a demo account. With improvements, then you can you use your real account, albeit thoroughly applying the principles of risk management.
By following these structured steps and implementing solid risk management strategies, you can trade futures more effectively while minimizing losses.
