Large crypto platforms offer a wide range of different financial tools that allow traders to capitalize on the crypto market. Some tools are easy to understand and use, such as spot trading. Other instruments require a lot of time and practice, for they bear many risks. Today we would like to discuss one of the most challenging financial tools in the crypto market – futures – and explain how to apply one of the most popular strategies – spread.
Futures crypto trading is an investment strategy that allows investors to capitalize on potential price fluctuations without having to own the underlying asset. By buying or selling contracts representing a specific amount of assets at a predetermined cost and date in the future, investors can benefit from changes in market prices while mitigating their risk exposure. Essentially, both parties enter into a contract: for example, one party may agree to purchase crypto at an agreed-upon value on a specific date; conversely, another participant would then agree to sell that coin at a predetermined cost.
By engaging in crypto futures trading, investors can leverage market opportunities and perhaps even make income amid a bearish trend. This form of speculation allows investors to wager on the future value fluctuations of digital tokens as well as secure their existing cryptocurrency holdings.
Strategies to Apply on a Crypto Futures Exchange
There are several futures trading strategies that investors can use. Here are a few examples:
- Trend-following
- Range trading
- Long and short
- Pullback
- Spread.
How to Use the Spread Strategy to Trade Crypto Futures?
By trading spreads, investors seek to capitalize on the range of value between two or more agreements for the same digital asset. This gap of values is referred to as a “spread,” and those who engage in this strategy can make substantial profits from exploiting it.
As an example, a trader can capitalize on the market shifts of Bitcoin by buying one futures agreement with an expiration date three months from now and selling another contract that expires six months away. If the value of Bitcoin rises during this period, they will make a profit based on the range between these two contracts.
Spread trading can provide a buffer against the effects of market turbulence. Additionally, it is utilized to exploit price discrepancies between different futures agreements for the same asset, as well as any possible market inefficiencies that might exist.
Nevertheless, to ensure success in spread trading one must closely observe the markets and have a strong comprehension of futures structures. Welcome to the WhiteBIT cryptocurrency futures exchange to try futures strategies and different leverage ratios to understand how they work in practice. Read the WhiteBIT blog to find out about perpetual futures available on the WhiteBIT exchange.
