What is futures trading?
What is Futures Trading in Crypto? Simply put, Futures trading is a futures contract, which is an agreement to buy or sell a crypto asset at a specific price (pre-determined price) at a specific time in the future (what is the date to be determined), just like real estate.
For example: If Bitcoin is worth $100,000 today, you can enter into an agreement to buy or sell it for $105,000 in the future in 6 months. If the price goes up, you will make a profit, and if it goes down, you will lose money.
There are two types of futures trading :
One is a purchase and the other is a sale.
Long Position: This means entering into an agreement to buy a crypto in the future. You will profit if the price increases.
Short Position: This means you agree to sell a crypto in the future, so you will benefit if the price drops.
Why do we do Future trading?
When we think the price will increase: If we think that a crypto may increase in value in the future, we can make a profit by entering into a buy contract.
Conversely, if we think the price will decrease, we can make a profit by entering into a sales contract.
To reduce risk: Sometimes futures trading is used to reduce the risk of losing money. For example, someone who owns a lot of Bitcoin may enter into a sell contract to avoid losing money if the price drops.
Let's look at a simple example: Futures trading.
Admin Abdi: Let's say he thinks Bitcoin will increase.
Let's say the price of Bitcoin is $100,000 today, but it actually went up to $102,000, for example, for convenience 😁 and Abdi
He thinks Bitcoin could rise to $105,000 or more in the next three months, so he enters into a Bitcoin futures contract, which means he has agreed to buy one Bitcoin for $105,000 in 3 months.
result
If the price of Bitcoin is $107,000 in three months, Abdi will have made a profit because he agreed to buy Bitcoin for $105,000 and now has Bitcoin worth $107,000.
If the price of Bitcoin is $103,000 in three months, he will go bankrupt because he agreed to buy Bitcoin for $105,000 and could now buy it for $103,000.
Similarly, if you think Bitcoin will decrease
The price of Bitcoin is $100,000.
Abdi enters into a put option on the assumption that Bitcoin will fall to $95,000 or below in the next three months. This means that he has agreed to sell one Bitcoin for $95,000 in 3 months.
result
If the price of Bitcoin is $93,000 after 3 months, Abdi will be profitable because he was going to sell it for $95,000 and now he can buy it for $93,000.
If the price of Bitcoin is $97,000 in three months, it means that Abdimadridista 😁 will be hurt because he had agreed to sell it at $95,000, so he could have easily sold it at $97,000 if he had not made that deal.
https://t.me/E_crypto88https://t.me/E_crypto88