Friday, 19 August 2022 07:21

The Best Futures Trading Strategies

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Crypto trading field is evolving, we can see that large crypto platforms expand their functionality and add advanced tools for trading. One of the most often used trading types among advanced traders is crypto futures trading. Let’s talk about it in this article.

Futures is the way you can multiply your profit due to leverage. Leverage is a mechanism that is presented on many large crypto platforms. It allows to “borrow” funds from the exchange itself (specially created reserve fund) or from other users willing to loan their funds.

Futures are contracts made between two parties. The essence is to forecast the asset’s rate in the future and “bet” on it. If your prediction is correct, you receive a lot of gains; if not - you lose. Gains and losses depend on the leverage you pick.

Let’s put you have a small number of initial investments, so you want to make a profit using leverage. So you invest only a tiny sum while taking leverage of X10, X20, etc. That’s a chance to receive a lot of gains having just a small initial amount.

Some crypto platforms allow for tremendous leverage, but you should keep in mind that the more leverage you pick, the more considerable losses you will bear in the case the price moves in another direction you thought.

Since the crypto market is highly changeable, you should consider all the risks of picking large leverage. There are several futures trading strategies that may help you act wisely and avoid losses.

Futures Trading Strategies That Work

Here are some futures trading strategies to implement on the crypto market:

  • The pullback strategy
  • Going long or short
  • Breakout trading
  • Spread trading
  • Trading the range
  • Counter-trend trading

Let’s discuss one of the most often used - the pullback crypto futures trading strategy.

The Pullback Strategy

The strategy is based on assets’ rate pullbacks. Price changes are typical for the crypto market. The price crosses the resistance support level or breaks below it and then moves back to the level if it has broken. 

What does a resistance level mean? That’s the level of the price the market can’t break and cross. Support level means the price level the market feels difficult to break below.

When the market is moving upward, the asset’s rate exceeds the resistance level fixed before and then moves back again, retesting the support level. When the retesting is completed, you may place a long position expecting the next time the price will receive its high level.

Then the price again breaks the established support level and starts to move in another direction to establish the new support level again. That’s the time when you can open a short position and make a profit on a downward market trend.

Thus, traders receive gains on the constant price movements up (trying to cross the resistance level) and down (towards the support level).

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