Binance (Overview)
Binance was founded by Changpeng Zhao, a developer who had previously created high frequency trading software. Binance was initially based in China, but later moved its headquarters out of China due to China’s increasing regulation of cryptocurrency.Binance is a cryptocurrency exchange that provides a platform for trading various cryptocurrencies. It was founded in 2017 and is domiciled in the Cayman Islands. Binance is currently the largest exchange in the world in terms of daily trading volume.
Binance future:
Binance Futures is part of the Binance exchange and lets users trade futures. The Binance futures market is described on the Binance website as the “fastest-growing crypto-derivative exchange by trading volume,” and offers a leverage of 125x the margin. Binance Futures contracts are designed to implement high standards of quality and execution for investors speculating on the value of cryptocurrency assets.The list of cryptocurrencies that can be traded using the Binance Futures platform is quite extensive and includes the market’s most popular digital assets. Crypto futures are a way to trade the future price action for crypto assets. Crypto futures have undeniably been one of the most exciting instruments for trading since the arrival of digital assets. It basically allows traders to gain exposure to digital currencies without the need to possess actual cryptocurrencies.Benefits of Binance future
It is important to note that futures are not fool proof investments, crypto are one of the most volatile asset classes available. You’ll need an experienced investor to leverage futures properly. That is you’ll need to have a firm understanding of the market cycles and fluctuations if you intend to make a profit trading futures. Notwithstanding there are some undeniable benefits that comes along:
1.Cash Settlement: Crypto futures are settled in cash. This makes sense once you realize that no actual trading occurred. In fact, the investor and the exchange never own any asset during the transaction. Rather, an agreement to trade the asset in the future at a set price trades.
2. Crypto Shorts: Another advantage Futures bring to the market is the ability to short. Investors can short futures by repurchasing their contract at a lower price.
3. Margin Trading: One aspect of futures is margin trading, which essentially means that an investor only requires a percentage of a contract’s total in order to participate.One of the chief risks associated with futures trading comes from the inherent feature of leverage. Lack of respect for leverage and the risks associated with it is often the most common cause for losses in futures trading. Exchange sets margins at levels which are deemed appropriate for managing risks at clearinghouse level. This is the minimum level of margins required by the exchange and provides maximum leverage. For example, if the initial margin for gold is 2.5%, it implied 40 times leverage. In other words, a trader can take a position equivalent to Rs. 100,000 by only depositing Rs. 2,500 in his or her account. Clearly, this represents great amount of leverage which is defined as the ability to take large exposures with little upfront cost.
Liquidity Risk
Liquidity risk is an important factor in trading. Level of liquidity in a contract can impact the decision to trade or not. Even if a trader arrives at a strong trading view, he may not be able to execute the strategy due to lack of liquidity. There may not be enough opposite interest in the market at the right price to initiate a trade. Even if a trade is executed, there is always a risk that it can become difficult or costly to exit from positions in illiquid contracts.
Settlement and Delivery Risk
All executed trades need to be settled and closed at some point. Daily settlement takes the form of automatic debits and credits between accounts with any shortfalls being recovered through margin calls. Brokers are obligated to fulfill all margin calls. Use of electronic systems with online banking has reduced the risks of failed daily settlements. However, non-payment of margin calls by clients poses a serious risk for brokers.
In cases where clients fail to pay margin calls, brokers need to be proactive and take steps to close out positions. Managing risks of client non-payment is an internal broker function that should be done in real-time. Delayed response to client delinquency can result in the creating losses for brokers if not default.
Similarly, the risk of non-delivery is substantial for physically delivered contracts. Brokers need to ensure that they allow only those clients access to trade deliverable contracts till maturity who have the capacity and ability to make good on delivery obligations.
Interest Rate Risk
The risk that an investment’s value will change due to a change in the absolute level of interest rates. Normally, rise in interest rates during the investment period may result in reduced prices of the held securities.
supervision, internal controls, and documentation of standard operating procedures and segregation of tasks are essential for running a brokerage house as well as for reducing instances and impact of operational risks. Operational Risk
Operational risk is a major source of losses for brokers as well as investor complaints. Errors due to manual mistakes by staff are a major area of risk for all brokers. Measures like adequate staff training, supervision, internal controls, and documentation of standard operating procedures and segregation of tasks are essential for running a brokerage house as well as for reducing instances and impact of operational risks.
Trading Session:
You must open a futures trading account and deposit in USDT, BUSD or Crypto currencies supported on the platform.
1. First select an asset from the drop-down box panel under the Main Menu. This will populate the Place Order section of the platform with your chosen cryptocurrency trade.
2. 2. Next, select the trade order size and include a stop loss or take-profit level if desired.
3. Finally, click the “SUBMIT” button and the new trade will become visible in the Open Positions panel of the Binance Futures platform.
Difference between spot and future trades:
1. Leverage - Leverage makes futures trading extremely capital-efficient. With a futures contract, you can open a 1 BTC futures position at a fraction of its market value. Spot trading, on the other hand, does not provide leverage. For example, to purchase 1 BTC in the spot market, you would need thousands of dollars. Assume you only have USDT 10,000 available. You could only afford to buy USDT 10,000 worth of Bitcoin in this case.
2. Flexibility to Long or Short - If you hold cryptocurrencies in the spot market, you may benefit from capital appreciation as the value of your cryptocurrency rises over time. Futures contracts, on the other hand, allow you to profit from short-term price movements in either direction. Even if the price of Bitcoin falls, you can participate in the downtrend and profit as prices continue to drift lower. Futures contracts can also be used to protect against unexpected risks and extreme price volatility, making them ideal for miners and long-term investors.
3. Liquidity - With trillions of dollars in monthly volume, the crypto futures markets provide deep liquidity. For example, the Bitcoin futures market has an average monthly turnover of $2 trillion, surpassing trading volumes in Bitcoin spot markets. Its robust liquidity promotes price discovery and allows traders to transact in the market quickly and efficiently.
4. Futures vs. Spot prices - Cryptocurrency prices are determined by buyers and sellers through an economic process of supply and demand. The spot price is the ruling price for all transactions in the spot market. The futures price, on the other hand, is based on the prevailing spot price plus the futures premiums. Changes in supply and demand may cause the future premium to fluctuate.
Conclusion and Recommendations:
Without doubt futures trading has been in existence for almost 100 years. Future contracts don’t go missing. You might lose the money but not the contract and it’s regulated. So if you’re out there looking for opportunities to invest, Binance futures offers you the best platform to make more money.
But I will advise every prospective trader that wants to taste the Waters of futures trade should be sure of training and improving their knowledge and consciousness of the trading system and particularly Binance futures to avoid loosing money.
Links;
http//binance.com
http//euromoney.com
http//Binance Labs
Binance
