Trading futures on Binance

Trading futures on Binance

For some more advanced traders that have proven to themselves that they have proper risk management, using margin to trade with more capital could be a next step in their trading career. Binance’s future platform offers this solution.

Opening account

How to open a futures account can be found here.

Before being able to open a position, collateral has to be deposited into the future wallet. In futures trading, you can participate in market movements and make a profit by going long or short on a futures contract by using margin. The highest possible leverage on futures is 125x your capital but degrees of leverage can differ per trading pair.

There are quarterly futures contracts and perpetual futures contracts. The quarterly futures expire every quarter on a specific time and date at which the difference in price between the opening of the position and the current price of the futures is settled in cash and the futures contract ceases to exist/trade. Perpetual futures do not expire.

Before entering a position, realize that the liquidation level of your position could be higher than your financing level. The difference between the financing level and the price of the futures contract is the capital you put in. So the position could be liquidated without you even losing all of your capital. This is done by the exchange to protect itself.

Funding rate

Perpetual futures have a funding rate to ensure that futures prices and index prices converge on a regular basis. The funding rate comprises two components: the interest rate and the premium. It is paid to either long or short positions depending on the difference between perpetual contract markets and spot prices.

On Binance Futures, the interest rate is fixed at 0.03% daily (0.01% per funding interval), with the exception of contracts such as BNBUSDT, LINKUSDT, and LTCUSDT, where interest rates are 0%. Meanwhile, the premium varies according to the price difference between the perpetual contract and mark price.

This means that your liquidation level creeps towards your opening price.

Isolated/cross

Using isolated margin means that you only leverage capital at risk used for that specific trade. When using cross margin, your entire future account bears the risk.

Derivative

It is important to understand that you trade a derivative product when you trade futures instead of the actual spot value. So price can sometimes be even more volatile than the underlying spot price.