Bitcoin futures use the same rules and structure as traditional futures trading. To begin trading, you must first open an account with the brokerage or exchange. You can start trading once your account has been approved.
What is the best way to trade bitcoin futures?
The first thing to understand about trading bitcoin futures is that there are no bitcoins involved. In other words, because futures are financial transactions that settle in cash, no bitcoin is really exchanged.
You speculate on the price of bitcoin rather than buying or selling the underlying cryptocurrency asset, as with traditional futures contracts.
There is no need for a cryptocurrency trading platform or wallet. This is because futures contracts either settle monetarily on the delivery date or are offset as the delivery date approaches by traders reversing out of their positions.
The difference between the purchase price and the settlement price is paid out to the holder of the futures contract if the buyer or seller of a bitcoin futures contract holds the position and demonstrates a profit on the delivery date.
According to the CME Crypto Facilities Ltd. (CF) Bitcoin Reference Rate, the CME bitcoin futures contract (BTC) parameters are for 5 bitcoin (BRR). Between 3 p.m. and 4 p.m. GMT, this aggregates Bitcoin trading activity across major bitcoin spot exchanges.
A futures contract’s minimum volatility is $25 per contract, while calendar spreads’ minimum fluctuation is $5.
Trading hours for bitcoin futures on the CME, CME Globex, and CME ClearPort trading platforms are from 5 p.m. to 4 p.m. CST on Sundays through Fridays. Unlike bitcoin, which trades 24 hours a day, an hour of idleness between 4 and 5 p.m. provides a distinct starting and closing quote for the contracts.
The bitcoin futures contract’s listing cycle is the March quarterly cycle, which includes March, June, September, and December, as well as the next two serial months not included in the March quarterly cycle.
Serial months are months that are not part of the quarterly cycle and can be used to trade futures. The last trading day of the contract month is the last Friday. Trading in futures that are slated to expire ends at 4 p.m. GMT on the last trading day.
It’s just as vital to know how to trade bitcoin futures as it is to know where to trade, so choose wisely. A respectable futures broker will normally be a member of the National Futures Association (NFA) and will be subject to CFTC regulation.
To begin trading futures, you must first open an account with a registered futures broker, who will maintain your account and guarantee your trades. Futures commission merchants (FCMs) and introducing brokers are two terms used to describe futures brokers (IBs).
Is it possible to trade bitcoin futures?
Bitcoin futures, like stock or commodity futures, allow investors to speculate on bitcoin’s future price. Investors can trade monthly bitcoin futures on a variety of exchanges. Some are regulated, while others are unregulated.
Is it possible to trade bitcoin futures in the United States?
Bitcoin futures trading began in the United States in late 2017, giving traders and investors with a variety of options for speculating on cryptocurrencies without needing to own and hold Bitcoins. Trading began in December 2017, when two major US exchanges announced that new futures products will be available:
- The Chicago Board Options Exchange (CBOE) announced the launch of XBT on December 10, 2017. (CBOE Bitcoin USD Futures)
In 2018 and beyond, more major trading exchanges are expected to start selling Bitcoin futures products.
The following are some of the benefits of trading Bitcoin futures over merely buying and holding the cryptocurrency:
- With the option to trade Bitcoin futures long or short without needing to keep the underlying Bitcoins, you can have immediate exposure to Bitcoin price swings.
- Execute short- and long-term trading strategies with ease, or hedge any current Bitcoin holdings.
- To control Bitcoin futures holdings, employ margin and leverage, which allows you to make the most of your account equity.
- On futures positions, use stop losses, profit limit orders, and other trade management strategies that aren’t achievable with Bitcoins alone.
What is the price of a bitcoin futures contract?
The value of a single BTC contract is five times that of the BRR Index, and it is quoted in US dollars per bitcoin. The tick increments are expressed in $5 increments per bitcoin, therefore a one-tick move in the BTC future is worth $25.
What is the purpose of futures contracts?
A futures contract is a legally enforceable agreement to acquire or sell a standardized asset at a defined price at a future date. Futures contracts are exchanged electronically on exchanges like the CME Group, which is the world’s largest futures exchange.
Is futures trading considered gambling?
The greatest strategy to avoid gambling in the futures markets (a futures trading gambling hybrid) is to understand a gambling trader’s thinking.
- You forego mathematics, odds-stacking, and serenity in favor of sentiment, hope, and excitementremember, hope is not a plan.
- You trade in a direction but can’t perceive the longer- and shorter-term patterns that surround the trend you’re following.
- You’re trading on a technical level without considering the bigger picture.
- You’re trading purely on the basis of fundamentals without considering the smaller or broader technical picture.
- You are trading sentiment without analyzing it using various indicators that can help you determine whether your sentiment reading is correct or not.
- You’re a poor trader if you refuse to “average down” when the fundamental and technical scenarios favor it (corollary: you’re a poor trader if you refuse to “average down” when the fundamental and technical situations favor it).
- You don’t employ enough indicators to get a variety of viewpoints on the price activity.
- You employ too many indicators, which causes your viewpoints on price activity to get muddled and your answers to become slower.
- You rely on (static) knowledge much too much, preventing your strategy from adapting to your intuitive (“gut”) decisions.
- The manner you incorporate your indicators isn’t adaptable to market fluctuations.
- You choose frequent positive payouts over infrequent negative payouts (the risk-to-reward ratio is badly skewed against you).
- You move around from trading system to trading system, without committing to one that works.
- You continue to rely on a system that has consistently failed to meet its past performance goals.
- You comprehend performance measurements but are unaware that, at your level of trading expertise, you are unable to judge them.
- Your decisions are heavily influenced by your most recent outcomes (recency bias).
- Despite evidence to the contrary, you seek reasons why your method might be correct (confirmation bias).
- You believe in a trading guru without seeing proof that he or she is profitable in the market (versus making money on your tuition).
Webull
Webull may be less well-known than its rival commission-free trading app Robinhood, but it offers a robust portfolio of services, including bitcoin trading. Webull charges a spread markup of 100 basis points (1 percent of purchase price) on both sides of a trade, but there are no commissions on crypto trades (or equities and ETFs). Bitcoin, Ethereum, and Cardano are among the cryptocurrencies that can be traded. Webull is a broker worth considering because of its charting features and great mobile app.
TradeStation
Traders at this broker have a few options, as it has launched direct currency trading via TradeStation Crypto, with commission-based pricing. Pricing is determined by your broker’s account balance and whether or not your order is directly marketable. Normally, cost ranges from 0.05 percent to 0.3 percent of your order. Traders can also purchase and sell Bitcoin futures and benefit from significant volume trading discounts.
Binance.US
Binance is a specialized trading platform that lets you buy and sell digital currencies such as Bitcoin and Ethereum, as well as dozens of other, much smaller currency. You’ll get access to about 60 cryptocurrencies in total. Binance has a low commission structure that grows cheaper as you trade more. Trading fees begin at 0.1 percent of your trade value (i.e., $10 for every $10,000 transacted) and gradually decrease based on your trading volume over the previous 30 days.
Coinbase
Coinbase is a cryptocurrency trading platform that lets you trade digital currencies like Bitcoin, Ethereum, Solana, and Tether directly. You’ll have access to over 100 coins in total. For added security, you’ll be able to store your coins in a vault with time-delayed withdrawals. The commission structure of the exchange is quite high. It charges a 0.5 percent spread markup and a transaction fee that varies based on the size of the transaction and the funding source, albeit its Pro platform is less expensive.
eToro
eToro does not charge commissions for cryptocurrency trading, but it does charge a spread dependent on the cryptocurrency being traded, as do many other brokers. Bitcoin has a 75 basis point markup, but more esoteric cryptocurrencies can have a markup of up to 500 basis points, or 5%. CopyTrader is a key tool of eToro, and it allows you to track and identify other top traders on the platform, as well as imitate their trades. Before committing to this technique, be sure you’ve done your homework.
Kraken
Kraken is a cryptocurrency exchange that lets you trade in dozens of various digital currencies, including Bitcoin, Ethereum, and Cardano and Solana, as well as newer ones like Cardano and Solana. You’ll be charged a 1.5 percent fee, or 0.9 percent for stablecoins, with additional fees if you use a card and fund with a bank. A premium tier called Kraken Pro is available to more active traders, with fees ranging from 0.16 percent to 0.26 percent. Residents of New York and Washington state are currently unable to access Kraken.
TD Ameritrade
TD Ameritrade is one of the best full-service brokers on the market, and it not only offers traditional products like equities and bonds, but it’s also added Bitcoin futures to its portfolio. TD Ameritrade, on the other hand, does not allow direct trading in the digital currency. To get started with Bitcoin futures, you’ll need to meet the account minimum. (TD Ameritrade was purchased by Charles Schwab, and the two companies will eventually be integrated.)
Is it possible to buy Bitcoin on Robinhood?
When it comes to cryptocurrency, PayPal, Venmo (which is owned by PayPal), and Cash App all operate differently. Each of these apps has its own set of coins and fee structures for buying and selling cryptocurrency. While Cash App allows you to move your money off the platform or Bitcoin from another account into your account, PayPal and Venmo do not.
Robinhood Crypto
Within the app, you may purchase and trade a variety of cryptocurrencies, including Bitcoin, Ethereum, Bitcoin Cash, and even Dogecoin. A key advantage of trading crypto on Robinhood, like its other investment alternatives, is the lack of fees, which can vary greatly among traditional exchanges.
Many people are drawn to Robinhood because of its ease of use as an investment platform, whether they’re investing in crypto or the stock market, but it’s also what makes it risky. It’s been chastised for making trading too game-like and encouraging volatility over long-term investment development through aggressive trading. Approaching an already-speculative asset like bitcoin with that mindset, just like stock transactions, might make your investment considerably riskier.
In terms of cryptocurrency, Robinhood just revealed that it is developing its own digital wallet for its crypto users. You couldn’t move your private key (the encrypted code that provides access to your bitcoin) into your own wallet or trade on an exchange like Coinbase before on Robinhood. This was a big flaw for proponents of the crypto slogan “not your keys, not your currency.”