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As Cryptos like Bitcoin and Ethereum have gained major traction in mainstream media, newbie investors are finding their way to Crypto exchanges. Exchanges provide various types of trading to investors and traders based on their investment strategies, like spot trading, futures trading, options trading, and many more.
In this article, let’s learn about Crypto futures trading and some pro tips for beginners.
What is Crypto futures trading?
Futures are a kind of derivative trading instrument. These are regulated trading contracts between two parties that involve an agreement to buy or sell an underlying asset at a specified price on a specific date.
With futures, investors can protect themselves from unpredictable market conditions and guarantee that they will be able to buy or sell a specific Crypto at a given price in the future. However, if the price changes against a trader’s wishes, they may buy Cryptos for more than the market price or sell them at a loss.
Now, let’s have a look at some pro tips for beginners.
Futures trading pro tips for beginners
#1 Learn the basics and read more about the project
To trade effectively, it is crucial to have a thorough understanding of the fundamental components of the market. This involves gaining knowledge about blockchains and their functionalities, as well as the potential applications of Cryptos in the coming times. It is essential to understand smart contracts, such as ERC20 and ERC223, and tokens traded on the blockchain. Moreover, evaluating the market conditions for Crypto futures is also an integral aspect of preparation.
Engaging in the trading of Bitcoin and ETH futures necessitates a profound understanding of the futures market and the markets specifically pertaining to these two digital currencies. Typically, the market capitalizations of tokens and coins are considerably lower than that of stocks. Therefore, they entail greater risk but also offer greater prospects for growth.
If you’re new to trading, taking your time and avoiding making impulsive decisions is crucial. Effective planning can help you save or earn money. There is an abundance of online resources available, including Crypto forums, blogs, and social media profiles, that can help you learn about trading and investing.
Take time to read articles from various sources to gain a well-rounded understanding of the subject matter. Then, determine whether you want to trade or invest and develop a trading plan accordingly. It’s crucial to have a solid grasp of the fundamentals of the futures market, including market capitalizations, trading volumes, and price versus value.
Additionally, new traders should seek guidance from experienced investors to gain insights into successful trading strategies and tactics.
#2 Don’t miss out on risk management
Crypto trading involves three fundamental categories of risk. Established coins like Bitcoin and Ethereum may lower your risk exposure, but they are likely to have limited future growth potential. Conversely, trading coins and tokens with smaller market capitalizations may provide more significant opportunities for earning profits, but they also come with higher risks.
An oversupply of tokens or coins in the market can lead to a decline in prices. However, certain Cryptos limit the amount of their supply, which can help maintain their value.
#3 Interpreting technical charts is important
The prices of Cryptos are significantly influenced by media coverage and technological advancements. Nonetheless, technical analysis can assist in determining the opportune moments for buying or selling.
It’s advisable to familiarize yourself with concepts like candlesticks, supports, resistances, and indicators like moving averages and relative strength indices. However, if you lack advanced knowledge of technical analysis, it’s not recommended to base your trades solely on it.
#4 Analyzing the project’s fundamentals is crucial
It’s essential to conduct a thorough analysis of a project’s fundamentals before investing in Cryptos. A project’s benefits can be a significant indicator of an asset’s potential growth. Past successes in trades and investments have often resulted from careful evaluations of the technology, team, and use cases.
It’s crucial to avoid being swayed by hype and to exercise caution when dealing with substantial sums of money. If you lack the expertise to evaluate the technology independently, consider seeking the advice of a trusted expert. However, be wary of blindly trusting every expert you encounter.
#5 Engage with the community
Getting more involved in the Crypto community requires a greater time commitment, but it can be highly beneficial. By being active in Telegram groups and other social media channels of the project, you can gain access to valuable information.
Often, news and updates are initially shared with the core community before being made public. Additionally, engaging with the community can help you gauge the overall market sentiment, which can be valuable for trading purposes.
Bottomline
Entering into Crypto trading is, without a doubt, a very difficult step to take, especially if you are a newbie. But, if you learn the basics of the projects and their fundamentals, along with technical analysis, you can surely succeed in Crypto futures trading.
Start your journey today with WazirX. Happy trading!
Frequently Asked Questions
Is Mining Cryptocurrency Legal?
Cryptocurrency mining can be time-consuming, expensive, and sporadically profitable. Mining has an appeal for many cryptocurrency enthusiasts as miners are paid directly with crypto tokens for their efforts. The legality of cryptocurrency mining is dependent on where you live. In India, there is no restriction on crypto mining.
How Safe Are Cryptocurrencies?
Cryptocurrencies can be safe, but your crypto wallets can be hacked if proper security steps are not performed.There are also dangers and uncertainties associated with investments, and we cannot declare any virtual currency investment risk-free. Buying and selling cryptocurrencies does not have to be dangerous if the trader is well-versed in the market and treats his coins with care.
What Is Cryptocurrency?
A cryptocurrency is a digital currency secured by encryption, due to which chances of activities such as counterfeiting and double-spending taking place get close to impossible. Cryptocurrencies get created on blockchain technology ( a distributed ledger enforced by a distributed network of computers). Cryptocurrencies are unique in that they do not get issued by any central authority. The term "cryptocurrency" comes from the encryption techniques used to keep digital currencies and the network safe.
Is Bitcoin And Cryptocurrency The Same Thing?
Bitcoin is a cryptocurrency that was designed to facilitate cross-border transactions, eliminate government control over transactions, and streamline the entire process without third-party intermediaries. The absence of intermediaries has resulted in a significant reduction in transaction costs. Satoshi Nakamoto, the creator of Bitcoin, created the first cryptocurrency in 2008. It began as open-source software for money transfers. Since then, plenty of cryptocurrencies have emerged, with some focusing on specific fields.
What Is The Safest Cryptocurrency To Invest In?
Bitcoin has had the highest market capitalization, has been around the longest, has the most experienced development team, and has enormous network impact and brand recognition. As a result, while trading cryptocurrencies, the rate of return on Bitcoin is commonly used as a benchmark. However, the risks associated with cryptocurrencies remain, and the safest cryptocurrency for you depends on your analysis.
Is Crypto Legal In India?
Cryptocurrencies are legal in India, and anyone can purchase, sell, and exchange them. It is currently uncontrolled, as India lacks a regulatory structure to oversee its operations. Per the Ministry of Corporate Affairs, companies must now record their crypto trading/investments within the financial year. In cases where a person receiving the gains is an Indian tax resident, or the cryptocurrency is regarded as domiciled in India, cryptocurrency transactions have been taxable in India
How To Invest In Cryptocurrency Stocks?
Cryptocurrency can be purchased in two ways: through mining or exchanges. The process of confirming and adding transactions to the blockchain public ledger is known as cryptocurrency mining. Cryptocurrency exchanges are another option. Exchanges make money by charging transaction fees, but there are alternative platforms where you may communicate directly with other cryptocurrency traders.
How Many Cryptocurrencies Are There?
There are over 5000 other digital currencies available on the internet in addition to Bitcoins. The only problem is that they haven't gotten the users' attention. Besides Bitcoins, a few other digital currencies have gained popularity among users. It's been more than ten years since Bitcoins were first released, and now they've achieved new heights thanks to their phenomenal success.
Who Invented Cryptocurrency?
Satoshi Nakamoto invented cryptocurrencies and the technology that makes them function in 2009. The presumed pseudonymous individual or persons who invented Bitcoin used this identity. In addition, Nakamoto created the first blockchain database. Even though many people have claimed to be Satoshi Nakamoto, the person's identity remains unknown.
Is Cryptocurrency Legal In India?
In India, cryptocurrencies are legal; anyone can purchase, sell, and trade cryptocurrencies. They are currently unregulated; India does not have a regulatory framework in place to regulate its functioning. According to the Ministry of Corporate Affairs (MCA), companies must now declare their crypto trading/investments during the financial year, according to the Ministry of Corporate Affairs (MCA). Cryptocurrency transactions have been taxable in India when people receiving such gains are Indian tax residents or where the crypto is considered to be domiciled in India
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
