The Basics

The first thing you need to become a good futures trader is a trustworthy cryptocurrency exchange.

Binance Futures has been my go-to exchange for trading derivatives.

There are various factors that distinguish Binance, particularly as a starting place for newbies.

Binance provides the following advantages:

Binance Futures supports over 100 cryptocurrency trading pairings. As a result, your favorite coin is most likely listed.

Binance charges cheap trading commissions.

To execute trades, you must have access to leverage and significant liquidity.

The network has developed numerous security features, including a $300 million Insurance Fund, to ensure that users are secured 24 hours a day, seven days a week.

Now that we’ve covered the benefits of trading on Binance Futures, let’s go over how to set up your Binance account.

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The steps outlined below will get you started quickly and seamlessly on Binance.

1. Click the link above to open the Binance sign up page and then enter your email or phone number. Then type a strong password.

2. Verify your account. This is a simple KYC verification process. KYC refers to a process that crypto exchanges (and even banks) use to gather identifying data and contact information from clients for the purpose of preventing fraud, money laundering, and other illicit activities. You can either use your Driving License, Government-issued ID or a Passport for the KYC process.

3. Enable Two Factor Authentication (either Google Authenticator or SMS Authentication). Binance actually requires you to have 2FA enabled before you can buy crypto on the platform. Without the 2FA code, you cannot complete a transaction. So, ensure you enable it. You can follow this handy guide on setting up two factor authentication.

4. Funding your account. If you already hold crypto in another wallet, you can deposit them into your Binance Wallet. Read this guide on how to deposit to your Binance account. Alternatively, you can buy crypto directly using your credit/debit card on the Binance website. This guide will take you through that process. Another way of buying crypto is P2P and it’s also the easiest.

This allows you to buy crypto from other Binance users without fees.

Also before we jump to the next step, I think it is worth mentioning that it’s best to buy USD stablecoins (BUSD or USDT) for futures trading purposes but also keep in mind that Binance allows you to trade futures using actual cryptocurrencies as the base asset. These are known as Coin-Margined futures.

Crypto futures that use USD stablecoins as the settlement currency are known as USD-margined Futures.

5. Finally, you need to transfer the funds from your spot wallet to the futures wallet.

Open the spot wallet and click Transfer button, then choose the stablecoin coin (BUSD or USDT) that you’ve just bought and initiate the transfer.

With the funds in your futures wallet, you’re now set to start day trading.

Futures trading, as the name implies, is a market in which traders buy or sell an item for delivery on a future date at a preset price.

This idea has changed over time. The futures market is a place in the cryptocurrency ecosystem where you may wager on the direction you believe the prices of digital assets will move.

Binance provides both perpetual futures contracts and classic derivatives, which lock in future contract delivery at a price specified today.

For the purposes of this guide, we will look at perpetual contracts that do not have an expiration date.

Perpetual futures, despite their youth, allow traders to wager on any direction the market takes.

This, on the other side, raises the possibility of liquidation, often known as a margin call.

This simply implies that if prices move against your trade, you may lose money.

Longing and shorting are now introduced, which is only feasible with futures trading.

Being long implies that you believe the value of an asset, such as Bitcoin, will rise. Being short, on the other hand, implies that you expect the asset’s price to fall.

Due to the volatile nature of cryptocurrencies, you’ll soon discover that shorting is an integral feature to have as it allows you to profit off price declines.

Entering a short position can also be an excellent way to manage risk and to hedge existing assets in your spot account during bear markets.

Trading is an extremely emotional experience at any level.

When the market is rising, people tend to become greedy, which leads to FOMO (Fear of missing out). Also, due to an illogical dread of seeing red candles, people frequently sell their coins.

While day trading can be a profitable side job, it is critical to grasp the emotional component of the human decision-making process.

Even technical analysis indicators, in order to generate solid trade signals, rely significantly on human psychology.

From my own experience, I began to enjoy the adrenaline of day trading after I realized how psychology affects the market.

To summarize, understanding how emotions influence the market is essential for becoming a reliable trader.

But, before we get into market analysis, let’s go through some of the most typical components you’ll see every time you check in to your Binance Futures account.

Professional trading interfaces might be intimidating to a first-time user, but if you focus on the most critical aspects first, everything else will fall into place quickly.

Binance provides a sophisticated, yet user-friendly trading interface that combines every critical aspect required to become a successful trader.

This is what you’ll see when you open your futures account:

Binance also has a desktop client which is exactly the same as Binance web interface.

Download the Binance Desktop client here for free.

You can also monitor your trades with the Binance mobile app which is available for both Android and iOS. Download the iOS app here and Android app here.

When you open a Bitcoin chart or the trading chart of any other token, you will observe a trade history or market structure.

Trade history can be divided into categories. Each group is then used to create a candlestick.

A candlestick is made up of price data from the open, high, low, and close. These numbers, often known as OHLC, are used to construct each candlestick.

Each candle’s size is determined by arbitrary intervals or periods. You might select any timeframe, such as 4 hours or 1 day.

Candlesticks take any number of deals in any given period and convert them into a single candlestick with only four values (OHLC).

We lose all data and information on the number and size of deals that took place during the period.

This is when the importance of volume comes into play.

Most candlestick charts have a volume overlay by default.

Whereas price and time values are used to generate candlesticks, trade size is used to generate volume bars, which are typically displayed at the bottom of the chart.

Volume represents the total amount of the asset traded in each period.

To summarize, candlesticks provide a visual representation of the trade history.

However, without the volume, a lot of information is lost when looking at candlesticks.

Increasing the volume provides a clearer picture of the trade history during each period.

Token Information

As you can see, this section is dense with information, but as a beginner, you should focus on contract-related information, which is highlighted in red.

Binance Futures’ default trading pair is BTC/USDT.

You can change trading pairs by clicking on the name of the current contract. Following that, a dropdown menu will appear, displaying all of the listed trading pairs.

Another important piece of information is the selected trading pair’s last and mark price.

Last Price is the most recent transaction price at which the contract was traded. In other words, the Last Price is determined by the most recent trade in the trading history.

It is used to calculate your realized PnL. (Profit and Loss).

Mark Price, on the other hand, is calculated using a combination of funding data and a basket of price data from multiple spot exchanges.

Your liquidation prices and unrealized PnL are calculated using the Mark Price.

Before placing your order, there are just two more buttons that you need to acquaint yourself with.

The first button lets you select the margin mode. Binance allows you to trade in either isolated or cross margin mode.

However, for the purposes of this guide, choose the isolated margin mode.

When you open a position in isolated Margin, you are only risking the funds that have been allocated to that specific position.

In other words, the allocated margin balance for each position can be adjusted independently.

What makes this setting even more user-friendly for beginners is that if a trade fails, only the amount you allocated to that trade is liquidated. The remaining margin balance is unaffected.

The other button lets you adjust the leverage.

As previously stated, the most appealing aspect of perpetual futures is leverage.

Futures trading is extremely capital-efficient due to the available leverage.

To buy 1 BTC on the spot market, for example, you’d need thousands of dollars — $44,000 at the time of writing — depending on market prices.

A futures contract allows you to open a BTC futures position for a fraction of the cost. This is only possible with leverage.

The greater your leverage, the less money you need to put into a position. Spot trading, on the other hand, does not support leverage.

Assume your spot wallet contains only USDT 5,000. You could only afford USDT 5,000 in Bitcoin in this case.

The best part about leverage is that it effectively multiplies profits when a trade goes your way.

Leverage is also at the root of liquidations, which are extremely common during periods of extreme price volatility.

When you click the leverage button, a leverage meter will pop up.

I have been using Binance Futures for quite some time and I’m allowed to access the highest possible leverage.

As a new user, your leverage may be limited for the time being. However, this is a good thing because it reduces your chances of making costly mistakes.

As a beginner, I’d recommend 5x leverage.

So, if you have $100 and 5x leverage, Binance will give you an extra $400 to trade with.

Binance will take $400 and some commissions when you close that trade. And you get whatever is left.

In the worst-case scenario, you will either lose the trade or be liquidated.

This occurs when prices move against you, particularly in volatile markets.

To make a good living in crypto, a trader must first understand how human psychology affects the market.

Every technical analysis tool, as you will soon discover, generates signals based on the psychology of the market at any given time.

Furthermore, as you become more accustomed to scanning and interpreting trading charts, you will begin to notice a much deeper relationship between Technical Analysis and price action.

As a result, human psychology is the distinguishing feature of the strategies we’re about to learn.

Binance offers a variety of tools for developing strategies, but I believe a charting platform like TradingView is preferable for technical analysis.

The benefit of charting on TradingView is that you can do more with the tools available, and it’s free.

Create a TradingView account here

Among all the aspects of technical analysis, perhaps the most important and actionable concepts are support and resistance.

Support and resistance lines for BTCUSDT on a 4 hour timeframe.

These are simply zones plotted on trading charts to identify key psychological levels or areas where traders have expressed an interest in buying or selling a commodity.

These levels occur over a number of timeframes. However, the levels become more relevant as the timeframe increases.

To become a profitable trader, you must first learn how to identify support and resistance, as they provide useful information about trade reversals, bounces, and breakouts.

Finding support and opposition can be difficult at first. Regular practice is the simplest way to learn.

Begin by selecting the 4 hour timeframe after opening a chart. Then draw a line through at least two areas that have seen significant price changes.

Another thing to keep in mind is that support and resistance levels are only useful if the market follows them.

Drawing a line above or below a previous event has no meaning.

As previously stated, Technical Analysis is purely psychological. In order for the level to have an effect, there must be a sufficient number of market participants who recognize it as significant.

Furthermore, levels should be tested at least twice before being labeled as support or resistance.

As you will soon discover, all traders place a high value on various types of patterns that appear on trading charts.

These are known as chart patterns, and while they are simple to identify, their importance in trading cannot be overstated.

Patterns appear organically on all timeframes, but it’s best to look for them on higher time frames for more solid trends.

As the name implies, reversal patterns predict price turning points, whereas continuation patterns predict where price is likely to continue its course.

Learning and recognizing price chart patterns can assist you in making sense of wild crypto price fluctuations. To get you started, here are some common patterns.

As you can see, the patterns come in a variety of shapes, but I’d like to point out that the actual patterns you see in your trading chart will not be perfect.

Don’t be concerned if your patterns don’t line up perfectly with the shapes shown in the image above.

New types of technical analysis indicators are introduced into the market on a daily basis. The creators of these indicators have only one goal in mind. To try to outperform the market.

Simply put, indicators play a significant role in determining winners, and there are numerous reasons why you should begin using them.

The good news is that the most widely used and effective indicators are also the simplest to apply.

The basic indicators to learn are Simple Moving Averages (SMA), Exponential Moving Averages (EMA), Relative Strength Index (RSI), Bollinger Bands (BB), Moving Average Convergence Divergence (MACD), and Volume.

Learn more about these indicators by clicking here.

Before we get into how to create trading strategies with indicators, keep in mind that indicators aren’t a magic bullet in trading.

These tools will occasionally provide false signals, especially when markets do not exhibit a clear trend.

Price Action Trading, at its core, is about identifying trading opportunities based on price movements rather than indicators.

That is why experienced traders place a high value on candles and volume.

However, in order to understand what the data on the chart is telling you, you must first learn how to interpret prices.

Prices are useful in this situation because they simply show all of the interactions that occur between buyers and sellers.

Prices not only shape the market but also define the direction of the trend.

Checking volume is the simplest way to learn how to interpret prices.

Volume simply validates a trend.

A buy and sell signal is indicated by volume.

As a result, it is important to consider not only how much volume is available, but also how much people are willing to pay.

If everyone is buying at the market rate, the price will only rise.

Similarly, if everyone is selling at the market rate, the price will fall. This is a critical area of misunderstanding that takes time to comprehend.

In essence, one volume equals one sell and one buy. These are always equal, but if no one wants to sell at $100, the price must rise, and vice versa.

Moving on, increased interest is indicated by increased volume. In other words, many traders are interested in this type of price action.

If there is an uptrend with high volume, it indicates that the trend is more certain and reliable.

The white arrows show increasing volume and the resulting higher prices.

Volume in the preceding example indicates that the majority of the market is bullish and enthusiastic. It also strengthens the breakout.

That is, a large number of traders believed this was a watershed moment and expected further gains.

The move adds more liquidity for larger players to join in, and price action is generally easier to trade.

Low volume breakouts, on the other hand, indicate waning confidence. Clearly, there aren’t many traders interested at that point.

Price action will be choppy and more likely to fakeout in this case.

Finally, high volume dumps at the end of a strong trend can be a good sign of a reversal, or at the very least a sign of caution.

The opposite is also true. This means that high volume pumps at the peaks of super extended moves can also indicate the top.

Such moves indicate imminent liquidations, a lot of overenthusiasm, and a lot of positions taken at overextended prices, implying that many traders will be trapped or stopped out abruptly.

My experience as a cryptocurrency trader has taught me that you can’t really beat the market unless you have rules in place.

As a general rule, the market does not move in a straight line up or down. Price action is frequently made up of peaks and troughs. As a result, whenever you confirm a trend, give it time to play out.

Another important consideration is leverage. Never trade with high leverage as a beginner.

Anything greater than x5 leverage is too much for a beginner. Trading with high leverage only increases the likelihood of liquidation.

Here’s a comprehensive set of guidelines that every trader should follow.

1. Never place a trade immediately after opening the chart. Anyone who does this is simply reacting to apprehension about missing out. Furthermore, it’s unlikely that you’ll open the chart at the exact top or bottom for a perfect entry.

2. Before entering trades on lower time frames, zoom out (from low to high time frame, e.g. 30 minutes to 4 hours) and map out key levels on higher time frames.

3. Determine the time frame you want to trade on (e.g. 4 hours or 1 day).

4. Examine price action first, then use your indicators to confirm your directional bias. Indicators are supplementary criteria.

5. Look for counter-arguments to your trade. Could you be mistaken? Is there anything that contradicts your directional bias?

6. Determine what would render your trade idea invalid. This is where you would close your position or set your stop loss. We have to get rid of our losers somewhere.

7. Determine how much money you are willing to risk on this trade. Do not begin by calculating your potential profit.

8. Reduce the size of your position if you are not comfortable with the amount you are risking. It’s as simple as that.

9. Set goals based on the risk:reward ratio.

10. Step 3 should be revisited. Do not hold your trade for any longer than the time frame in which you are trading. This will frequently result in you being stopped out.

11. Redraw your trade plan. Am I underestimating resistance? Do I yearn for help? If yes, continue.

12. Wait patiently for your entry criteria to be met. Don’t start a trade too soon. This results in a less favorable risk-to-reward ratio.

13. Enter your trade according to your strategy.

14. Set your stop loss just past the point of invalidation. EXCEPTIONS WILL BE MADE.

15. Don’t get too worked up if your trade goes against you a little. This is typical. Most trades do not immediately profit and remain profitable throughout. You’re overexposed if you’re panicking!

16. Set a profit target.

17. Put the graph away.

18. Set up alerts to notify you when key levels are reached.

19. Steps 17 and 18 keep you from micromanaging your business.

20. Keeping in mind the time frame, it is acceptable to check your trade after some time has passed, but not immediately after entering.

21. Remember your trade’s counter-arguments. What are the alternative scenarios that could lead to your trade failing?

22. If you notice anything suspicious, you can manage your trade at this point. Whether you take a partial profit/manage your stop loss, and so on. This is accomplished on the fly.

23. If you were defeated. Examine it. Take something away from it.

24. Don’t engage in retaliation trading. You are not required to “recover all profits on the next trade.” You are not required to immediately begin another trade. You were overexposed if you are emotionally upset about the loss. Again, avoid retaliation trading. Instead, avoid overexposure in your next trade.

25. Examine your trade. If you win, congratulations; now move on. It’s all over. Don’t over-celebrate your winners. Wait until you’ve recovered from the high of a big winner before entering another trade. This is when you are prone to returning large profits.

Even in professional football, teams concede more immediately after scoring.