Futures trading is also an advanced trading type that is more popular for advanced traders. Like the name futures, it basically means future price direction of an asset to make profits. Futures trading involves an agreement between the trader and the exchange to buy or sell a particular asset at a future date agreed upon. In Futures trading the trader either predicts long or short. When a futures trader predicts long, the trader buys the future contract when the trader makes a prediction that the price of the asset will rise.
When a futures trader predicts short, the trader sell the future contract when the trader makes a prediction that the price of the asset will fall. Futures trading is simply all about speculation in which a trader predicts the future price of a particular asset and either go long or short which is basically a buy or sell contract that the price of the selected asset will either go up or go down.
Like every other forms of trading, futures trading has its benefits. Some of the benefits of futures trading are; Firstly, it Gives traders the ability to make use of leverage to make more profit. Secondly, Futures traders can diversify by having multiple positions opened for the different cryptocurrency assets. Lastly, Futures traders can still make use of different trading strategies to make the best trading decision
With benefits, it also has its drawbacks. Some of the drawbacks of futures trading are; Risk level is very high. In futures trading, the trader doesn’t own the underlying asset. Futures traders can lose all the capital in a single trade when making use of leverage. Only available for advanced traders. No everyone can trade futures because of the requirements needed.
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