What’s going on? My name is Simon and in this article, I’ll show you step-by-step how to trade futures on Binance. We’re going to be covering everything you need to know, so after watching this article, you’ll be ready to make your first trade in the futures market. If you don’t already have your Binance account, make sure to use the first link down below in the description to create your account. By using that link, you’ll get a signup bonus of $600 in cash or cash-back rewards. Let’s get started with the article.
The first thing we’re going to do is log into our Binance account. Once logged in, we’re going to go to derivatives on the top menu and click on Binance Futures Overview. Here we have some different options. First, we have the USDSM futures, which stands for US dollar stablecoin Margin futures. As you can tell by the name, these futures are settled in a US dollar stablecoin.
Specifically for Binance, that’s either USDT, US dollar Tether, or B USD, the Binance US dollar. Then we have coinM futures, which stands for coin MarginF futures. If we trade coin MarginF futures, we’re going to use coins like Bitcoin or Ethereum as margins for our trades.
We also have Binance Leverage tokens and Binance options, which we’re not going to cover in this article. Let’s click on Trade Now under the USDM futures or CoinM futures. That will take us to the trading interface. In this article, I’m not going to go in-depth on what everything means here on the screen. As this is a futures trading tutorial, I assume you’ve already done some trades in the spot market and you already know the basics.
In general, the futures trading interface looks very similar to the spot trading interface. We have the price chart in the center, which we can switch from Original View to Trading View.
That way we get some technical analysis tools here on the left side. Then we also have the order book, the most recent trades, and the window where we can place our orders. Now, before we can trade futures, we’ll need to transfer some funds into our futures wallet. To do that, we’re going to go down to the bottom right to the asset window.
Now, if you don’t already have some funds in your Binance account, you can click on Buy Crypto to get some funds on your account. In my case, I already have some funds in my Fiat and Spot wallet, so all I need to do is transfer those funds into my future wallet. I’m going to click on transfer. Here we can choose where we want to transfer from. I’m going to choose my Fiat and Spot wallet.
I’m going to transfer to my USD SM Future Wallet because I want to use US dollar stablecoins to trade. Here, as you can see, I have some US dollar tether that I can transfer. I’m going to choose USDT here. I’m going to simply transfer over 100 USD which is equivalent to 100 US dollars. Now when I switch the assets window to show USDT, I can see that I have 100 USDT that I can now use and trade with.
Now we’re ready to choose the futures contract that we want to trade. Over here we can find all the available future contracts. But first, let’s quickly go over what a future is. A future is a contract saying that we will buy or sell a specific asset at a set price at a specific time in the future.
So for example, when we are trading a Bitcoin future, we’re not buying or selling Bitcoin itself as we would do in the spot market, but we are entering a contract saying that we will buy or sell Bitcoin in the future. So for example, when we go long on a Bitcoin future, we expect the price of Bitcoin to go up. So we enter a contract saying that we’ll buy Bitcoin at a later date but at a price that is determined right now and which is usually close to the current Bitcoin price. So let’s say we go long on a future contract for one Bitcoin for $25,000 per Bitcoin.
On the delivery date, which is when the future contract expires, we’ll have to look at the Bitcoin price to see if we made a profit or if we’ve lost money. If at the delivery date, Bitcoin is trading at $30,000 per Bitcoin, we’ve made a $5,000 profit because we have logged in the price of $25,000 per Bitcoin when we entered the futures contract. On the opposite side, if at the expiry date, Bitcoin is trading at only $20,000 per Bitcoin, we have lost $5,000.
Unlike in the spot market, futures contracts also allow us to profit when assets are going down in value. So for example, if we expect a Bitcoin price to fall, we will go short in the future. So let’s say the current Bitcoin price is $25,000and we go short one Bitcoin. That means that we agree to sell one Bitcoin at $25,000 in the future. If Bitcoin falls to $20,000 until the delivery date of the future, we’ll make a $5,000 profit. And if Bitcoin rises to $30,000, we lose $5,000.
So with futures trading, we are speculating if the price of an asset will go up or down. In practice, we don’t need to wait until the future contract expires to get out of our position. If we want to close our long position, all we need to do is open a short position for the same amount and that will cancel out the long position, getting us out of the trade.
The profit or loss is then equivalent to the difference in price between when we opened the long position and when we opened the short position. And even though we might enter a future contract about buying or selling Bitcoin or any other underlying asset, in practice, we don’t need to buy or sell the asset itself.
Instead, we can just use any available asset as collateral, also called margin, to fund our trade and pay up when we close our position. As we’ve already seen, for USDM futures, that would be either US dollar Tether or Binance US dollar. And for coins futures, we can use these cryptocurrencies right here. So as I have the stablecoin USDT in my futures wallet, I need to make sure the USDM futures are selected.
Then I’m going to type in BTC USDT, the ticker for Bitcoin and US dollar Tether, to see what Bitcoin futures I can trade that are settled in US dollar tether. Here we can see that we have a perpetual future contract and a quarterly future contract. The quarterly futures are the ones that have a delivery date or expiry date, which is the date when our position would be automatically closed. So for this one, it would be September 30th. The first two digits here are the month and the last two digits are the day when this future will be settled.
The perpetual futures, on the other hand, don’t have a delivery date, meaning they will never expire and we can stay in our position until we manually close them and we don’t have to worry about our future expiring.
So let’s go ahead and choose the perpetual future contract for Bitcoin. Now, the next thing we need to talk about is our margin ratio, which we can see down here. But before we talk about the margin ratio, let’s look at what the word margin means. Margin is the amount of money we must have in our futures wallet to protect both the traders and Binance from possible losses on trades. So the margin acts as collateral on our future positions.
Now, the margin ratio is our indicator to see how close we are to getting our future position liquidated. If the margin ratio hits 100 %, liquidation will be triggered. Liquidation means that our margin balance is too low to fund our positions, so the system will automatically close them and we’ll lose our entire margin balance in the process. So for example, if we go long on Bitcoin, but the price of Bitcoin keeps declining, then the required margin to keep our position open might become higher than our available margin balance, which at that point, the margin ratio hits 100 % and all of our positions are closed to make sure we can cover our losses with the margin balance we still have.
The goal is definitely to avoid liquidation and to make sure our margin balance is always high enough to fund our positions. The margin balance ratio is calculated by taking the maintenance margin and dividing it by our margin balance. The maintenance margin shows us the minimum amount of margin balance required to keep our positions open.
As we can see here, we are currently in single asset mode, which means that only our US dollar tether will be considered as our margin balance for our open positions in the US dollar tether. If we switch from single asset mode to multi-asset mode, all of the other assets in our futures wallet, like for example, BUSD or Bitcoin, will also be counted towards our margin balance. And by the way, the P&L, the profit, and the loss of our open positions will also be considered as part of our margin balance, which means that if we would hit a 100 % margin ratio and liquidation would be triggered, all of our open positions.