What Is Common Between Crypto Futures And Margin Trading?

If you are an experienced trader or at least have a registered account on one of the popular crypto exchanges, you might have heard about margin trading and futures. Let’s try to figure out what these trading tools are all about.

Margin trading

When a trader does not have enough funds to invest, one may take advantage of margin trading, or trading with leverage. This tool allows one to borrow and invest a greater sum into an asset. Funds can be borrowed right from an exchange or other users. The leverage may be X10, X20, X30, and so on. If a trader is confident about the success of one’s trading position, one may even set an X100 leverage. We must warn you that margin trading is not a casino game, it requires an understanding of strategies, the market, and the cryptocurrency itself. 

Futures 

Crypto futures trading is a deal that two parties make through an exchange. They determine the future price for an asset and claim a day when the contract expires. Some crypto futures exchanges allow settling perpetual agreements (White BIT, Binance Futures).

An example: two parties make a deal on Bitcoin futures. As of the moment of the deal, the BTC rate is $35000. The first party placed a position for “long” (hoping the rate would and grow), another party placed the position for “short” (expecting the rate would drop). When the time comes and the parties must conduct the deal by the contract, the BTC shows $40000. It means, the party who played “short” will owe $5000 to an exchange, while the first party will receive $5000 as a result of this btc futures contract.

Advantages

• You can add leverage to your position. The WhiteBIT exchange allows you to use up to x20 leverage. 
• This trading tool allows making a profit on both upward and downward markets – depending on how skillfully you forecast the asset’s perspectives. 
• Allows to hedge risks and manage your trading portfolio wisely.

As you can see, both trading tools – margin and futures – allow you to multiply your deposit and receive a big profit, still, they both bear high risks.