Futures trading on Binance: what they are and how they work

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Futures trading is quite a special and famous feature on Binance, loved by many professional traders. So what is Binance futures trading? How to trade futures? We will find out in the article below.

What is futures trading?

Futures trading on Binance is the feature of trading a contract to buy or sell a certain cryptocurrency in the future on the Binance exchange. This is the distinguishing feature that distinguishes between the spot market and the futures market.

To distinguish the futures market from the spot market, you can interpret the cryptocurrency spot market on Binance as similar to the underlying stock market. By trading real shares, you can make purchases to own shares and sell those shares only when you no longer want to hold those shares.

And the spot market on Binance is a form of real cryptocurrency ownership and coin ownership, and you can use that coin as a payment method, transfer between different exchanges.

Meanwhile, futures trading is similar to when you trade share CFDs.

You do not fully own the coin, but only the contract to exchange a pair of coins. And just like in the stock CFD market, in the futures market, you can place BUY (when the trend is up) and SELL (when the trend is down) orders.

In addition, you can also set a stop loss, take profit or use leverage, just as you would when trading CFDs on shares. Due to the use of leverage, you can trade futures with a small amount of capital. However, using leverage also means that you will face the risk of burning out your account.

The futures market will be riskier, and not suitable for people without much experience.

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Some concepts in the futures market

  • Position: This is the status (Buy/Long or Sell/Short) you are taking.
  • Buy/Long Position: This is where you take a Buy a coin, and when the price goes up, you will make a profit and a loss if the price goes down.
  • Sell ​​/ Short position is your sale of coins; when the price goes down, you win and lose when the price goes up.
  • Initial Margin: The amount used to open a position before using leverage. Example: To open a Buy/Long 1 BTC position at 30,000, an initial deposit of 300 is required and a leverage of 100 is used.
  • Maintenance margin: The minimum amount required to maintain your position. If the margin balance falls below the maintenance margin, the position will be automatically liquidated.
  • Liquidation: a position forced to close when the margin balance is less than the maintenance margin.

Binance Futures Types

The futures market is divided into two main types: USD(S)-M contracts and Coin-M contracts.

Coin-M Futures: Exchange rate of a currency against USD

  • Perpetual M-Coin
  • Delivery coin-M

USD(S)-M Futures (USDT-M): the exchange rate of a currency against stablecoins USDT or BUSD

  • USDT PERPETUAL
  • USDT Delivery
  • BUSDT Perpetual

Perpetual futures will not have an expiration date. It is up to you to decide when to close your futures contract.

Meanwhile, delivery futures will have an expiration date set at a predetermined date in the future. For the expiration date, even if you don’t want your trade to close automatically.

Futures Trading Terms

In the futures market, there are the following types of trade orders:

  • Limit: When you place an order, you will enter a price in the “Price” box; when the market reaches that price, it is not possible to execute the order.
  • Market: Your order is executed as soon as it is placed at the current market price.
  • Stop Limit: The order includes the stop price and the limit order. You will open a pending order at the limit price you set earlier when the market reaches the stop price.
  • Stop Market: The order includes the Stop Price and the market order. When the market price reaches the stop price, it will immediately match the order to the market price.
  • Trailing stop: The order will be executed at the “trigger price”, The trailing stop order will automatically set a stop loss when the price moves in favor of the preset rate (1% or 2%). Once a new stop loss is set, the trailing stop order will not correct in the opposite direction.
  • Posts Only – The order will be added to the order book, but will not be executed immediately.

Options for ordering:

  • TP/SL: Click this box to set the level to take profit, stop loss
  • Orders Decrease Only – Check this box so that the executed order is only used to close the position and not open any more positions.

TIF – correspondence mode:

  • GTC: The order is executed until it is fully matched. You can choose the default mode as GTC.
  • CIO: The order is partially filled and the rest is canceled.
  • FOK: the order is processed or will be canceled.

Conclusion

Therefore, we have covered some of the most basic concepts related to futures trading on Binance. In the following articles, you will be guided step by step on how to run the command of the future. When to use what type of order is appropriate and profitable?

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