What is Binance Futures? Should Beginners Trade Futures?

If you have already traded spot on Binance, you may have heard of the term "Futures Trading." Many people have made fortunes through futures, while many others have lost their entire principal. What exactly is futures trading? Can beginners play it? This article gives you a comprehensive understanding. Before we start, please make sure you have registered an account through the Binance Official Website and installed the Binance Official App. Apple users can refer to the iOS Installation Guide to complete the installation.

What is Futures Trading

Futures trading, also known as derivative trading. Simply put, you are not buying or selling real cryptocurrencies, but trading on the price movements of cryptocurrencies.

Core Differences from Spot Trading

Let's use a simple example to understand:

Spot Trading: You spend $65,000 to buy 1 BTC, and sell it when Bitcoin rises to $70,000, making a profit of $5,000. You hold the real Bitcoin throughout the process.

Futures Trading: You think BTC will rise, so you use a $1,000 margin to open a 10x leveraged long contract. If BTC rises from 65,000 to 70,000 (an increase of about 7.7%), your profit is 1,000 × 10 × 7.7% = $770. But if BTC drops by 10%, your loss is 1,000 × 10 × 10% = $1,000, meaning your entire principal is lost, which is called "Liquidation."

Key Concepts of Futures Trading

• Leverage: Multiplies your profits and losses. Ranging from 1x to 125x.
• Long (Buy): You bet the price will go up. If it goes up, you make money; if it goes down, you lose.
• Short (Sell): You bet the price will go down. If it goes down, you make money; if it goes up, you lose.
• Margin: The actual principal you invest.
• Liquidation: When your losses reach your margin amount, the system forcibly closes your position, and your principal becomes zero.
• Liquidation Price: The price point that triggers liquidation.
• Funding Rate: A fee periodically paid between long and short positions to balance the market.

USDS-M Futures vs. COIN-M Futures

Binance offers two types of futures:

• USDS-M Futures: Uses USDT as the margin and settlement currency, which is more intuitive and easier to understand.
• COIN-M Futures: Uses the corresponding cryptocurrency (e.g., BTC) as the margin and settlement currency.

If beginners want to try futures, it is recommended to start with USDS-M futures because calculating profit and loss in USDT is more straightforward.

How Big Are the Risks of Futures Trading?

This is the most important part, please read carefully:

Liquidation Is Very Real

Many beginners think liquidation is far away from them, believing "I only use low leverage" or "I will set a stop-loss." But the truth is:

• Crypto markets are highly volatile: It's common for BTC to swing 10% in a single day.
• Leverage magnifies losses: At 10x leverage, a 10% price movement against your position results in liquidation.
• Flash crashes/spikes (Wicks): Sometimes the price violently drops and surges in an instant, and your stop-loss might not trigger in time.
• Funding rate drain: Holding a futures position long-term can slowly eat away your profits due to funding fees.

Real Futures Trading Statistics

According to various statistics, in futures trading:

• Over 80% of retail traders lose money in futures trading.
• Many people don't just lose a portion, but their entire principal on futures.
• Even if they win once, many will lose it all back or even more in subsequent trades due to overconfidence.

Why Futures Trading Can Be Addictive

Futures trading has strong gambling characteristics:

• The temptation of high returns brought by high leverage.
• The thrill of frequent trading.
• The psychological trap of "I'll definitely win it back this time."
• The shorting mechanism makes you want to participate even in a down market.

Should Beginners Play Futures?

Here is direct advice: If you are a newcomer to cryptocurrency, it is not recommended to trade futures.

You should meet at least the following conditions before considering it:

• Have at least 3-6 months of spot trading experience.
• Have your own judgment system for market trends.
• Can bear the consequences of losing all the funds in your futures account.
• Have good emotional control.
• Have formulated strict risk control rules and can execute them.

If you meet all the above conditions and want to try futures trading, here is how to operate.

Binance Futures Activation and Operation Process

Activating Futures Trading

1. Open the Binance App.
2. Tap "Trade" at the bottom -> "Futures."
3. A risk warning and questionnaire will pop up upon your first entry.
4. Complete the futures trading knowledge questionnaire (you must answer a certain number of questions correctly).
5. Confirm that you understand the risks of futures trading.
6. Activation is successful.

Transferring Margin

1. Tap "Transfer" on the Futures page.
2. Transfer USDT from your "Spot Wallet" to your "Futures Wallet."
3. Enter the amount and confirm the transfer.

Important Advice: Only transfer an amount you can afford to lose entirely into your futures account. Do not put all your assets in.

Setting the Leverage Multiplier

1. Find the leverage multiplier display on the futures trading page.
2. Tap it to adjust the multiplier.
3. Beginners are advised to use 2-5x leverage and not exceed 10x.
4. Remember: The higher the leverage, the closer the liquidation price.

Opening a Position

Taking going long on BTC as an example:

1. Select the BTC/USDT Perpetual Contract.
2. Set the leverage multiplier (e.g., 5x).
3. Select "Market" or "Limit" order.
4. Enter the margin amount or the contract quantity.
5. Tap "Buy/Long."
6. Confirm to open the position.

Setting Stop-Loss and Take-Profit

After opening a position, you must set stop-loss and take-profit:

1. Find your position in the Positions list.
2. Tap "Stop Profit & Loss."
3. Set the take-profit price (at what price you want to take profits).
4. Set the stop-loss price (the maximum loss price you can accept).
5. Confirm the settings.

Closing a Position

To manually close a position:

1. Find your position in the Positions list.
2. Tap "Close Position."
3. Choose Market Close (executed immediately) or Limit Close (at a specified price).
4. Confirm to close the position.

Risk Control Rules for Futures Trading

If you decide to trade futures, you must follow these rules:

Fund Management

• Funds in your futures account should not exceed 10-20% of your total assets.
• The margin for a single trade should not exceed 10-20% of your futures account balance.
• Never borrow money to trade futures.

Stop-Loss Discipline

• Every trade must have a stop-loss.
• Once a stop-loss is set, do not modify it arbitrarily (especially do not move it in the direction of a larger loss).
• Control the maximum loss of a single trade within 2-5% of your total capital.

Emotional Management

• Do not rush to "win it back" after a loss; this is when you are most prone to making wrong judgments.
• If you lose 3 consecutive trades, stop trading and take a day off.
• Do not impulsively open positions just because you see others making money.
• Do not become overconfident when profitable; continue to execute your trading plan.

Record and Review

• Record the reason for opening, stop-loss/take-profit levels, and actual PnL for each trade.
• Regularly review your trading records and analyze what you did right and wrong.
• Continuously optimize your trading strategy.

Mock Trading — Practice Before Real Combat

Binance provides a futures mock trading feature where you can practice with virtual funds:

1. Find the "Mock Trading" option on the Binance App Futures page.
2. The system will give you a certain amount of virtual USDT.
3. You can use these virtual funds to simulate real futures trading.
4. It is recommended to mock trade for at least 1-2 months before considering real money.

Mock trading can help you get familiar with the interface and trading process, but note that mock trading and real trading are completely different in terms of psychological pressure. When trading with real money, your emotional reactions will be much stronger than when simulating.

Frequently Asked Questions (FAQ)

What is the minimum amount needed for futures trading?

It depends on the leverage multiplier and trading pair. When using higher leverage, you can open a position with just a few dozen USDT. However, it is not recommended to use too little capital, as trading fees will take up a high percentage.

Will I owe Binance money if my position is liquidated?

Binance has an "Insurance Fund" mechanism, so usually, you won't end up owing the exchange money. At worst, a liquidation means your margin becomes zero.

What does shorting mean? How do I do it?

Shorting means you bet the price will go down. The operation is the same as going long, but you select the "Sell/Short" button instead. If the price does fall, you make money; if it rises, you lose money.

What is the difference between Perpetual Contracts and Delivery Contracts?

Perpetual contracts have no expiration date and can be held indefinitely (but you must pay funding rates). Delivery contracts have a fixed expiration date and settle automatically upon expiry. Beginners are advised to use perpetual contracts.

How much are the futures trading fees?

The default Binance futures fees are 0.02% for maker orders and 0.05% for taker orders. You can get a discount by paying with BNB.

Do I have to set a stop-loss?

It is strongly recommended to set one. Not setting a stop-loss is like driving without a seatbelt—most of the time you are fine, but the one time you crash, it can be fatal.