Introduction to Binance Futures and Practical Guide on How to Trade Perpetual Contracts on the Platform

Introduction

The adoption of cryptocurrency continue to grow week in and week out even though the recent months have been associated with bearishness until a healthy phase was sighted recently. There have been causes to improve the trading experience for traders and an important aspect of it is the futures contract that enables users to open a larger position based on capital.

Particularly talking about the Binance Perpetual contracts in this context today, a product from the exchange that has dominated the ecosystem over time and has constantly added more features to ensure traders have better experiences. In CZ's voice, "Keep building", Binance has been building to give users the best. So, this context would cover Perpetual futures contract and how it works on Binance.

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Binance Perpetual Futures Contract

Futures contracts have been a very popular concept in crypto trading over the years which enable users to open a position in either an uptrend or downtrend market through buy or sell orders. This feature ensures profits are still achieved in any phase of the market which cancels out many earlier assumptions of only gaining when the market is bullish in the crypto ecosystem, as such with futures crypto traders can enter any direction and get something out of it.

Essentially, a futures contract is associated with a magnification of positions which means users gain access to more capital to trade an underlying asset using a preferred leverage (x). Binance perpetual futures contract has reformed crypto futures trading unlike the traditional futures contract that is associated with an expiry date, perpetual contracts have no expiry date which means a trader opens and closes his or her contracts at will.

Conversely, Binance perpetual futures allow traders to open a long (buy) or short (sell) position to trade a desired underlying asset with a preferred leverage, satisfying the magnification of position to improve profitability in a market.

For example, say a user is willing to trade BNB with a long (buy) position when it's trading at 300 USD and choosing leverage of 10x. BNB is the underlying asset here. Provided the user have a capital of 100 USD, the leverage chosen ensures he or she now have access to 1,000 USD to trade about 3.33 BNB. The user have entered a position to maximize his or her profitability in the BNB market.

From the illustration above, the leverage of 10x has allowed the trader to enter a position that earns him or her more profits he or she wouldn't have been able to achieve if just 100 USD was utilized for a long position on Spot trading. Understanding more about leverage is just magnifying your initial margin, for example, it can be expressed as 1:2 (2x), 1:5 (5x), 1:10 (10x), and much more.

The initial capital of 50 USD with 5x leverage gives you access to 250 USD to trade an underlying asset, it's that simple. Your position on a perpetual futures contract can be held for as long as you want with no expiry but beware of liquidation, this is a forced closure of your position to avoid a negative balance.

To avoid liquidation if you are still confident of a reversal towards your initial setup, you can continuously fund your futures wallet to accommodate the progress of the trade but understand the risks involved in doing this.

How to Trade on the Binance Perpetual Futures Platform

We would be discussing how the Binance Perpetual futures contract can be utilized for trades and this would include image demonstrations using the Binance mobile App.

• The first step is funding your USD futures wallet. To do this, one can easily transfer funds from the spot wallet. Select the asset, e.g BUSD, the amount, and then click the confirm transfer button.

• Click futures at the bottom of the App to visit the platform futures trading. As a first-time user, you may be required to make a quick account creation, it only takes a few seconds or minutes.

• Click the pair section from the last screenshot to select a desired pair you are willing to trade. For example, BNB/BUSD.

_BNB/BUSD

• Choose a margin type, let's say cross and a desired leverage, maybe 10 or lesser/higher leverage.

_{Margin and Leverage}

• It's a time to make a decision about the position you want to open, buy or sell. You need to have an understanding of reading the charts for technical analysis of the market behavior of the asset. Click the candlestick icon as indicated in the last image to see the chart.

_{BNB/BUSD Chart}

• From the chart above on 15mins time frame, the market reversed towards the bearish phase, and a recent higher low was sighted which could be a sign of a potential uptrend reversal and a chance for opening a buy (long) position.

• On the BNB/BUSD perceptual contracts, choose market for instant execution of your buy/sell contract, and select the size of the asset you will be using. I pulled the slider to maximum because the aim is to utilize the entire 5 BUSD. Then, click the Buy/Long button to open the contract.

• The trade would be running now and it can be seen just at the bottom under positions to show different details about your trade, for example, the margin size, unrealized profits, percentage return on equity, percentage risk, and so on.

• It's possible to set take profit and stop loss levels for your trades as you may not be available all day to watch the trade. You can add conditions by clicking the stop profit and loss from the last screenshot. Switch to Position TP/SL, customize the levels, and hit the confirm button. 1:1 RR was utilized for the trade above.

• Adding positions to take profit and stop loss levels opens two new conditions under the open orders to close the trade if the price is equal or greater/lesser than the set price to achieve stop profit or loss.

_{Stop Profit and Loss}

Entering a long or short position in the Perpetual futures contract shouldn't be a gamble, ensure you got your method right and certain of your setup as achieved by some market technical analysis skill. The same method of buying in this content can be utilized for sell (short) perpetual trades, all you have to do is to switch to sell.

Why you should use Binance Perpetual Contracts?

• Availability of a lot of assets on the Binance Perpetual futures platform that gives users the choice of many assets to select from.

• Availability of reasonable leverage traders can utilize to magnify their positions.

• Sufficient liquidity to get orders filled quickly and low transaction fees.

• The exchange's credibility and overall security that ensures the safety of customers' funds on the platform. Traders' funds on the Binance Perpetual contracts are SAFU.

Conclusion

In conclusion, the Binance perpetual futures contract has enabled traders to leverage large availability of assets to magnify their positions and maximize profitability. Binance perpetual has a user-friendly interface suitable for all levels of traders, likewise, traders' funds are safe on the platform.

You should watch out for the addition of new assets on the Binance perpetual contracts, an example of that is the FET listing coming up on the 17th of January 2023, with up to 20x (leverage).

You can register on Binance futures to start your futures trading journey, see the links below.

• https://www.binance.com/en/futures/ref/fredquantum.

• https://www.binance.com/en/futures.

Warning: Cryptocurrency is a volatile asset as such trading crypto is extremely risky, be sure you understand the risks and how Binance futures work.