Attracted by the massive wealth, tons of investors have flocked to the crypto market, and the high returns of futures trading have overshadowed the risks. Unlike the stock market, crypto trades do not have any rise/fall limits. In addition, the market stays open for 24 hours a day, which also normalizes drastic rises/falls. As such, crypto traders face both opportunities and challenges.
In the crypto market, futures, which are a type of financial derivatives, come with a margin system that multiplies profits/losses through leverage. Compared with spot trading, futures trading is riskier and more rewarding at the same time. However, we have been warned in countless cases that trading based on feelings alone will only lead to losses. To improve the winning rate, futures traders should work out a customized set of strategies for opening orders. As such, today, we will offer some universal suggestions on opening orders in three stages (before/during/after opening an order).
Before opening an order: Sound asset management
You should not only have coins and USDT in your account but also reserve funds elsewhere in case of extreme market conditions. The value of funds in your futures account should not exceed 50% of the total funds you own. Furthermore, the worth of each order you open should not exceed 10% of the funds in your futures account. This approach effectively lowers the trading risks and leaves sufficient funds to help you manage black swan events.
When opening an order:
Control the trade frequency: Trading futures frequently affects a trader’s mindset, reduces the likelihood of winning, and increases the trading cost. The transaction fee could be very expensive as it adds up over the long run.
Set the TP/SL price: After placing an order, you need to set the TP/SL price as soon as possible, especially the SL price. It is difficult to predict the peak and bottom of a futures market, and setting the right SL price allows you to reinvest in futures with remaining funds even if you chose the wrong direction.
Take suggestions with a grain of salt: Some traders would doubt their decisions after they learn the different trading directions adopted by the so-called “trading experts” or friends around them. Such doubts are irrational because no one, including Warren Buffett, always wins in the investment market. If you open an order based on rational decision, then there is no need to change your mind.
After opening an order:
Do not be greedy: Though greed is part of human nature, you must restrain from being greedy in order to win in futures trading. When profiting, you should take profit in time and lock in the profits; when suffering losses that exceed 10% of the total position value, do not hesitate to close your position as soon as possible since the risks are significant, and you can always open another position when the timing is right. Do not trust your luck. The painful experiences of countless investors have shown that going against the market trend will only lead to more losses and eventually forced liquidation.
Review your orders: You should learn from the orders you’ve completed and the market, whether it brings profits or losses. Then it’s important to keep improving your trading mindset and strategies until they match your own trading style and tactics, which will improve the error tolerance.
Considering that trading tactics differ among users with various levels of know-how, the suggestions above are simple and suitable for the general investors, especially beginners who have just started trading futures. Trading futures takes a lot of learning. As they say, experience is the best teacher. To keep profiting from futures, you need to constantly place orders and trade and create a customized set of trading strategies to overcome market uncertainties.
*The above cannot be relied on as any investment advice.