Well, since last few months, the cryptocurrency tradings are on the mark. It is pretty astonishing to believe that, now there will be tradings through virtual currencies. But again, the technological developments have made it possible without any difficulties. This week, the cryptocurrencies soared above $19000 and are currently trading at $15000.
Indeed, the Bitcoin is gaining some serious popularity among the traders. It is the retail brokers, who are playing an important role in the trade of cryptocurrencies. As cryptocurrencies don’t have any centralized authority, the brokers have not made any specific rules for Bitcoin trading. It’s like any customer can come and participate in the trading.
Also Read: Crypto Trading Tips And Common Mistakes
Basic things to know about Crypto tradings
- How will the Crypto tradings work?
Cboewill is initiating the term listings in near-by months. It is also said that CME will start the Bitcoin trading shortly, but as of now, there has been no confirmation about that. The Cboe listings will expire on two business days, particularly considering the third Friday of every month.
- Who will determine the price?
At present, there are some cryptocurrency exchanges, and different exchanges have different pricing modules. Considering the best, Cboe will be using Gemini Trust Co. This exchange has been offering great benefits to customers for buying, selling, and storing digital assets.
It was founded in 2014, and since then it has managed to earn the trust of digital investors. It analyses the market demands for cryptocurrencies and accordingly determines an accurate rate. On the other side, CME is going to use Bitcoin Reference rate for determining the prices.
- What about the initial prices and size of contract?
So, as of now, Bitcoins are the most popular cryptocurrencies, and it is obvious the tradings will include Bitcoin. First of all, the marker makers will determine the initial pricing for trade and will initiate the trading. It is predicted that the initial pricing will be pretty close to the cash prices. And for every contract, there will be one Bitcoin. The minimum price interval per contract will be around $10. Once the trade is settled, the traders will get the settlement amount in dollars, not in Bitcoin or other cryptocurrencies.
- Are there any particular fees for crypto trading?
Yes, there will be a fixed fee for every crypto transaction. Well, the basic fee will be around $1 per contract. Cboe has got all rights to modify the transaction fee, anytime.
- What is the Margin rate for Crypto trading?
At present, the margin rate with Cboe is 44% while with CME, it is 33%. Cboe just raised the margin rate from 33% to 44% to ensure a safe transaction for traders. Suppose, Bitcoin is trading at $15000, then you have to buy contact with a margin of $6600 (44%). Well, the margin rates may vary from the market demands and pricing of Bitcoins.
- What are the timings for Cryptocurrency Trade?
You can trade for almost 24 hours in a day. There have been no restrictions regarding the timings. But there are some variations in weekday’s trading and weekend’s tradings.
- What do I need to initiate the Cryptocurrency trading?
All you need is a Future account and Future broker. You can consult the best Future broker in the market and can proceed the tradings.
- What about Volatility of Cryptocurrency market?
Well, a lot will be depending on the liquidity of contracts. Initially, there won’t be many fluctuations, but with time when the number of participants will increase, it’s obvious the market will become volatile.
- Is there any trading halt or price limit in Cryptocurrency trading?
There are no price limits, but there will be some trading halts when the price will either go up or fall. If the price rises or falls 10% as compared to the previous day price, then there will be a halt for 2 minutes. But if there is any fluctuation about 20% in price, then there will be a trading halt for 5 minutes. The cash market will go as per move, and there will be no trading halts in that.
- Is it possible to short the Futures Contract?
Yes, the traders have got all flexibility to short the Futures Contract as per the comfort. They can anytime close out their position, or they can simply wait for the automatic expiration of cash settlement.
- Who will be the market makers?
There won’t be any fixed market maker in Crypto tradings. Mainly, the large players with some heavy participation will be termed as the major market players of the trade market.
So, these are some of the basic questions and answers which the traders need to know, before participating in the cryptocurrency trading. Now let’s understand some core terms related to Future Cryptocurrency trading.
What is Margin Trading?
The traders, who want to trade with Bitcoins and other cryptocurrencies have a basic idea regarding how to buy and sell the contracts. But there is another method through which you can trade with Cryptocurrencies. Yes, it is termed as Margin Trading. In this trading platform, you have to buy on a margin, buy borrowing necessary amount from the Exchange or other market makers.
Well, borrowing money and making a profit seems pretty riskier as compared to the ordinary cryptocurrency trading. But the profit margin is very impressive that too within a short period. After buying the margin with loaned capital, you have to place a short or long bet on your digital asset in the trade market. This is not at all recommended for beginners, who are trading with Cryptocurrency. But if you are a regular trader, then opt for this procedure.
Mainly, if you have some limited crypto capital in your future account and simply want to raise base investment, then go for Margin trading. As you have trade with the loaned capital, there are high chances the market may not follow your predictions. Thus, the risks percentage is very high in Margin trading. But if you play the gamble with good patience, then you can make some good profit out of the risk.
Stop-Loss orders, Liquidation, Long & Short trade
Above, we have simply discussed the Long and short trade in Margin Trading. The Long trade refers to buying a crypto contract and holding it for a long time to gain profit in the future. Here, the trader is predicting that there will be a profit in the future. Thus the behavior of Crypto market will change according to that. But if you are opting for a short-term trade, then you are predicting that there will continue price drop in the future.
Depending on your Long & Short term trade, the liquidation of the market is determined. When your digital assets go beyond the lowest call, then your position will be liquidated at the present market price. Many traders have lost their assets due to the liquidation of cryptocurrencies. To avoid such situation, a ‘stop-loss order’ tool has been developed by the makers.
With this tool, you can simply restrict the liquidation of your assets and can avoid unfortunate losses. With this particular feature, the traders can set an approximate price for selling the Contracts. When the current market price reaches that specified selling price, then the contract will be automatically dispersed.
How to avoid flash crashes?
You can never predict the situations of flash crashes. Thus you need to be prepared for the worst. Well, the stop-loss order tool can greatly help you in this. As discussed above, the tool will automatically release your contracts at the specified selling price, which will save you from losing your position in the crypto trading market. Apart from stop-loss order, you can also opt for a Margin call. With the margin call, the trading platform will notify the borrower regarding the degradation of the price.
Different trading platforms have different Margin call theories, and the execution takes place accordingly. This concept is mainly designed to indicate the borrower that, the position is in danger and immediate action is necessary. You can also allow the Margin call execution to take place automatically when it goes beyond the specific price limit. Indeed, this is an innovative feature, which greatly helps you in saving your assets.
Which will be the Ultimate Trading cryptocurrency?
Well, it is still a shocking experience that, the traders are going to trade with Cryptocurrency, but the reality is the ultimate truth. In such situations, the main question is, which will be Coin for Crypto trading. With the development of Blockchain technology, various cryptocurrencies have got their existence.
Though the predictions go in support of Bitcoin, still there are also chances of involving other Cryptocurrencies. Ethereum is quickly gaining its popularity among the traders, because of its rising market value. So, it depends on the exchanges, which cryptocurrency they are choosing. It is highly recommended to stay updated with the market information and to continue exploring the trading market of cryptocurrencies.