How to trade crypto futures on PrimeXBT in 2024? Explained by Digimagg

While futures trading is often considered complex, it can yield significant profits for those proficient in trading futures on PrimeXBT, our preferred platform for crypto futures trading.

In this article, we delve into futures trading intricacies, highlighting why PrimeXBT stands out as the optimal platform for futures trading. Additionally, we provide a detailed, step-by-step guide on how to trade crypto futures on PrimeXBT.

Understanding crypto futures trading

To comprehend crypto futures trading, it's essential to grasp the concept of futures contracts.

What are futures contracts?

Futures contracts represent agreements between two parties – a buyer and a seller – to purchase a specified quantity of an asset at a predetermined price and time in the future. These contracts are legally binding and enable traders to speculate on the performance of an underlying asset.

Traditionally, futures contracts were associated with commodities such as oil, gold, and corn. However, futures markets have expanded to encompass various asset classes, including currencies, stock indexes, energy, and government bonds.

Crypto futures represent another asset class where futures contracts and trading are now prevalent, reflecting the growing diversification of futures markets.

The origin of futures

While futures are believed to have originated in England during the 16th century, the first recorded utilization of futures markets resembling those in contemporary times occurred at the Dōjima rice market in Ōsaka, Japan, during the 18th century. During this period, rice served as compensation for the bannermen, who coincidentally were Samurai warriors.

Initially, futures trading was outlawed due to allegations of inflating rice prices. However, when rice prices plummeted significantly, authorities sanctioned the trading of such contracts to counteract the decline.

Understanding crypto derivatives

For those curious about crypto derivatives, crypto futures represent a type of crypto derivative. These financial instruments derive their value from a cryptocurrency asset, enabling traders to speculate on its price without possessing the underlying asset. This feature is advantageous for traders who prefer not to manage the secure storage of digital assets.

Futures contract expiration process

Upon the expiration of a futures contract, the involved parties are obligated to fulfill and settle the contract, irrespective of the asset's market price at the contract's termination. Consequently, one party will inevitably incur a profit, while the other sustains a loss relative to the prevailing market price.

Fulfillment of a futures contract

Upon the expiration of a futures contract, there are two methods of settlement:

• Physical delivery: The seller transfers the underlying asset to the buyer, such as delivering Bitcoin.
• Cash settlement: The buyer receives the monetary value equivalent to the underlying asset.

Cash settlement is predominantly favored for futures contract settlement, particularly since most contracts are now entered into by speculators. This holds true even for contracts related to physical commodities like grain or fuel.

However, it's common for futures traders to roll over their contracts before expiry. This entails settling the difference on the existing contract, resulting in either a profit or loss, and immediately initiating a new position on a contract with a different expiration date. This approach allows traders to maintain their position without fulfilling the entire contract.

Understanding the intricacies of cryptocurrency futures

Now, let's delve into the specifics and elucidate the intricacies of crypto futures trading. Firstly, it's important to note that many crypto futures contracts, including the one discussed here, are perpetual futures, meaning they have no expiration date.

Similar to spot markets, futures are traded among traders, but they can involve leverage, with each platform offering varying degrees of leverage. PrimeXBT, for instance, permits leverage of up to 200x, enabling traders to buy contracts worth up to 200 times their account balance.

When a trader holds a futures contract, their profit or loss is determined by the difference between the contract price and the spot price. Higher leverage can amplify these gains or losses, making it risky to trade with excessive leverage.

There are three crucial components of a perpetual futures contract that traders should understand when seeking to profit from trading crypto futures.

• Maker/taker fee: Makers provide liquidity to an order book through limit orders, while takers remove liquidity through market orders. These participants pay maker and taker fees, which vary by market.
• Financing: Also referred to as the Funding Rate, this mechanism aligns the futures market with the spot price. The Funding Rate, which is applied at set intervals (e.g., every 8 hours on PrimeXBT), may result in longs paying shorts or vice versa, encouraging traders to open positions that balance the futures market around the spot price and earn commissions.
• Next financing: Indicates when the next financing rate will be applied to or deducted from traders' margin accounts. By considering these contract elements, traders can assess the cost of trading futures over a specific period and the expenses associated with opening and closing trades. It's crucial to note that fees are based on the size of the position, not the margin size. Traders employing high leverage must ensure sufficient funding in their margin accounts to avoid liquidation.

The best place for trading crypto futures

If you're seeking a platform for crypto futures trading, we recommend PrimeXBT as our top choice. PrimeXBT offers markets for trading perpetual futures contracts for over 30 cryptocurrencies, along with highly competitive trading fees. Maker and Taker fees are set at 0.01% and 0.02% respectively, while the funding rate for both longs and shorts stands at 0.01%, calculated in 8-hour intervals.

In addition to crypto futures markets, PrimeXBT provides access to spot markets for cryptocurrency trading, forex pairs, popular stock market indices, as well as various commodities, including energies and metals.

Please note that PrimeXBT does not cater to users in the US or US territories.

PrimeXBT presents a feature-rich dashboard for futures trading enthusiasts, offering various market views and comprehensive data to inform their trading decisions conveniently in one place. Integrated charts from the popular TradingView platform enable traders to perform analysis seamlessly alongside executing, monitoring, and adjusting their trades.

In addition to its competitive fee structure across futures and spot markets for various asset types, PrimeXBT provides several other noteworthy features, including copy trading via the third-party Covesting platform, trading contests without requiring a deposit, a mobile app available for both Android and iOS users, an exceptional referral program with multiple tiers, an Academy featuring video content tailored for traders of all levels, weekly market reports based on technical analysis, and round-the-clock customer support via Telegram.

While PrimeXBT offers a feature-rich platform and an excellent user experience, it falls short in two areas: it operates without regulation in most jurisdictions worldwide, resulting in limited consumer protection, and it does not provide staking services unlike its competitors.

Trading crypto futures on PrimeXBT: A comprehensive tutorial

For those seeking guidance on trading crypto futures, we present this user-friendly tutorial for trading futures on the PrimeXBT platform. It includes step-by-step instructions accompanied by screenshots to facilitate the process.

Step 1: Registering a PrimeXBT account

If you haven't already, you'll need to sign up for a PrimeXBT account. New users who deposit a qualifying amount will receive a welcome bonus of $100. (A qualifying deposit must be $500 or more and made within 48 hours of registration, transferred to one of PrimeXBT’s global Markets trading accounts).

To register, you must verify your email by receiving a unique code, set up a robust password, and indicate your country of residence.

Verification of account

It's important to note that identity verification is not mandatory for PrimeXBT users. However, those who opt out of this process face a $20,000 withdrawal limit per 24 hours, and withdrawals may undergo manual review if flagged for suspicious activity. Further details are available on PrimeXBT’s withdrawal terms and conditions page.

Step 2: Depositing funds

To engage in futures trading, you'll need to provide the margin amount for the futures contract. PrimeXBT users can deposit funds via direct cryptocurrency transfers (BTC, ETH, USDT, USDC, and COV), direct cash transfers (using Perfect Money or AdvCash, subject to completing account verification), or by purchasing crypto through the connected third-party BAKSTA platform.

To begin, simply click on the Deposit button located on the homepage, choose your preferred deposit method, and follow the provided instructions to fund your account. It's essential to ensure that you select "Wallet" from the deposit location dropdown box, as this is where your futures account will be funded from.

Step 3: Access PrimeXBT’s futures markets

After your deposit has been processed (the processing time may vary depending on the currency and deposit method), navigate to PrimeXBT’s Futures Markets. You can do this by accessing the header, selecting "Trade," choosing "Crypto Futures," and then picking your desired futures market.

Please note that although only Bitcoin will be visible in the dropdown menu, you'll have access to over 30 markets in the trading menu.

Upon reaching the Futures Markets page, you'll be presented with a brief tutorial. It's recommended to go through this tutorial to acquaint yourself with the Futures platform.

Step 4: Select your desired futures market

Located in the upper left corner of PrimeXBT’s futures dashboard is the current futures market being viewed, accompanied by a dropdown arrow. Clicking on this arrow enables you to choose the specific futures market you wish to trade on.

Step 5: Transfer funds to your futures account

To fund your futures account, you'll need to transfer funds from your wallet. If you don't have the required cryptocurrency for the market you wish to trade on, you can either deposit it or exchange some of your existing currency on the Global Markets.

Located in the upper right corner of the futures dashboard is a green Fund button. Click on it and specify the amount of cryptocurrency you want to transfer from your wallet to your futures account.

Step 6: Configure trade settings

Every trader's preferences, market options, available assets, and risk tolerance vary. The place order module allows each trader to tailor their trade according to their preferences.

Click on the small pencil icon next to the Margin Type to access the Margin Edit section, where you can adjust your margin parameters. Once you've made the necessary adjustments, you can set these parameters and return to the futures dashboard to finalize your trade.

When you're satisfied with your trade, click on "Place Buy Order" to execute it.

Step 7: Implement stop-loss and take-profit limits

On PrimeXBT, you can't set the Take-Profit and Stop-Loss limits until after you've placed your trade. However, it's highly recommended to set these limits to safeguard your position.

Navigate to the Summary Module at the bottom of the futures dashboard, where your completed trade will appear as a Position. Trades executed as a Limit or Stop order will be displayed under the Order tab in the Summary Module.

In the Summary Module, locate the TP/SL column where you can click the pencil icon next to your open position to set your stop-loss and take-profit limits. Similarly, you can do this under the Orders tab for your pending trades.

Step 8: Monitor your trades

Once you're actively trading, it's essential to keep a close watch on your futures positions and pending trades. You can do this in the Summary Module at the bottom of the page, where you can also cancel pending orders and close open positions by simply clicking the corresponding buttons at the end of each row.

For guidance on reporting crypto futures trading for tax purposes, refer to our article covering crypto tax regulations worldwide.

Conclusion

With this guide, you're now equipped with the knowledge of how to trade crypto derivatives and where to do so effectively. PrimeXBT stands out as our preferred platform for crypto futures trading due to its extensive range of markets, high liquidity, mobile trading capabilities, and competitive fees.