Crypto Trading 101: Know How To Evaluate Bitcoin Futures For Profitable Trading

This post was most recently updated on July 28th, 2022

In recent times, the crypto market has witnessed a surge in the number of participants in the ecosystem. Each new day ushers in newbies who want to have their piece of the market by milking it but only a few understand how to go about it. The crypto market is a wide world. It acts as a subset of the financial market with other subsets found in the world itself. 

In the crypto world, there are several methods through which participants can make money some of which include Bitcoin Futures Trading, NFTs, Spot Trading, and so on but in this article, we will be focusing on ways through you which participants of the futures trading can make money thereby, having successful trade and losing less money. It is important to know that there is volatility in Futures Trading and as such, this article should not be seen as financial advice.

What Are Futures? 

Futures are contractual agreements between a buyer and a seller over an asset at a pegged price which is usually an agreement between both parties. In bitcoin futures trading, there is an agreement where a buyer agrees to buy a  financial instrument at an agreed date while the seller also agrees to deliver the financial instruments at the agreed date.

Futures trading follows the pattern of stock trading and other financial instruments. Bitcoin Futures trading is a large world and as such, it is only handled and executed by market makers and insider bigwigs.  

Now that you understand what futures trading is, how do you engage in a profitable adventure? This and more will be discussed in the next subheading.

What To Look Out For in Futures as a Newbie and a Professional for a Profitable Trade

Futures Trading simply implies trading with leverage that is, trading with accessed funds that in real-time, are not yours. It is also an existing contract between a buyer and a seller. These accessed funds come with risk and unyielding volatility and as such Stocktrades.ca, you need to be extremely careful with the way you handle them. To make profitable trades as a newbie or a professional, below are five points that should be noted before you begin:

  • Have a Solid Plan and Trade Setup
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The mistakes newbies and proclaimed Futures professionals make are going into a trade without a clear plan and setup. It is not enough to stare at charts but to understand and utilize them for a true end goal. For instance, say you are a trend-oriented trader, for you to conclude on taking a trade, an existing trend must be present, that is, there must be an established trend that would justify your reason for taking that trade. See the figure 1.1 below 

From the above image, we can confirm that there is a clear uptrend. This means that your reason for taking this trade is that you have identified a clear uptrend in the setup. This is what a clear trading plan should entail.

  • Always Have a Confirmatory Signal/Entry

It is not enough to have a plan and identify setups but spotting confirmations are important for a profitable trading journey. Say, for instance, a cancer patient is being told that he/she is now cancer-free after a particular surgery, the only confirmation that would keep the patient’s mind at rest is a test scan result affirming what the doctor has said. This also applies bitcoin futures trading. After you have identified a clear setup that is part of your plan, try to look for confirmations. These confirmations can also be referred to as confluence – an intersection between setup and confirmations. Confirmations could be in the form of retest, market structure break, pattern identification, and so on.  Check figure 1.2 below

In figure 1.2 above, a clear uptrend was identified, and a break in a clear resistance was established while our confirmation was the retest of the resistance that has now turned support.

  • Understand the Use of Stop Loss
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In the process of evaluating your chances of making a profitable trade, never underestimate the power of stop loss. Stop loss is the basis of a successful bitcoin futures trading journey. Why is this so? After you might have identified a clear pattern and got a confluence i.e confirmatory entry, the use of stop-loss is important as you can not always monitor a trade round the clock. Stop-loss serves as your invalidation point. Say, for instance, the price of  1 BTC is $30,000 and after running your technical analysis, your prediction says bitcoin will hit $32,200 but due to market dynamics, bitcoin crashed further down to $28,000. Depending on your position size, you could get rekt if there is no use of stop loss. Your stop loss could be at around say $29,500 which means that as soon as the price of bitcoin reaches 29,500, the system should close the trade for you to avoid further losses. It is important to know that stop loss is not just random figures. They are obtained using technical analysis.

  • Decide Profit Target and Risk to Reward Ratio

Going into a trade-in future without a target will make you run around a circle without any significant progress. The mistakes newbies and bitcoin futures enthusiasts make is that they fail to define a clear target for every trade they take. Say, for instance, you predicted the price of Bitcoin to increase from $29,500 to $32,000 and as the market dynamics would have it, it moved to your predicted price point but because it is impossible to always watch your trade around the clock, the market moved past your price point and dropped t say $28,000. Because you didn’t set a profit target, you missed the gains. So with the help of a profit target, you get to milk the market (if the market goes your way) without you monitoring charts around the clock. Just like stop-loss, profit targets are obtained through technical analysis. 

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Apart from that, only take trades that have a high risk to reward ratio. In other words, your profit target should always outweigh what you are willing to lose and the minimum recommended R:R is 1.5 i.e if you are risking  $10 on a trade, you should be potentially making $15 on the trade.

Now that you know how to achieve success in bitcoin futures trading, let’s look at how to get started.

How To Get Started In Futures Trading 

After you understand how bitcoin futures trading works including taking profitable trades, you must get to know how to begin that trading journey. Below are the steps involved to start trading.

  • Pick your broker

A broker in crypto trading is the exchange platform where you take your trade. Some of the most widely used are Binance, Coinbase, Kucoin, and so on. They are all verified brokers and few of the most trusted crypto exchange platforms in the world. 

  • Register and Verify Your Account 

After you are done choosing your most preferred broker, you register as a user and verify your identity as required.

  • Deposit USDT in your futures wallet

In bitcoin futures trading, bitcoin and all other altcoins are traded against USDT. This implies that your profits come in the form of USDT as well. For newbies who don’t know what USDT is, USDT is a stable coin of US dollars. Unlike Bitcoin and other alts, stablecoins are most times not directly affected by the volatility in bitcoin futures trading.

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My name is Donika Jonathan and i am a professional writer in multiple of areas. i have searched out different niches and brought up with amazing results. My posts are on famous blogs like article-submissions.com


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