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What is Futures Trading

2023.07.6 MEXC

In this article, you will explore the futures trading basics with MEXC Learn. This simple guide will help you to easily understand the derivatives market.

  • Futures are a form of derivative contracts that require the trading sides to complete a transaction of an asset at a fixed date and rate in the future. The buyer and seller have to follow the price set when the future contract is booked. This condition means that the price decided in the contract must be paid, regardless of the asset’s current price.

  • Future contracts can be for any physical commodities or any financial instrument. These contracts are detailed enough to list the quantities of the assets covered by the contract. Future contracts are commonly traded on futures exchanges like those offered by MEXC.

  • Futures are a common tool for hedging against falling market prices. Traders also use them to protect their regular trades from price fluctuations.

1. How does Futures work?

  • Futures contracts let traders fix the price of the asset in the contract. This asset can be any commonly traded commodity like oil, gold, silver, corn, sugar, and cotton. The underlying asset can also be shares, currency pairs, cryptocurrency, and treasury bonds.

  • A futures contract would lock in the price of any of these assets at a future date. A standard future contract has a maturity date, also known as its expiry and set price. The maturity date or month is commonly used to identify futures.

For instance

Corn futures contracts expiring in January are called January corn futures.

  • As a future contract buyer, you will be bound to take ownership of the commodity or asset at the contract’s maturity. This ownership can be in cash terms and does not always have to be physical asset ownership.

  • The main point to remember is that buyers can sell their futures contract to someone else and free themselves from their contractual obligation.

2. How to enter a futures trading terminal at MEXC?

2.1 If MEXCers intend to trade on the web, please follow the guidelines below to use the MEXC page to buy crypto futures:

2.2 If MEXCers intend to trade on the mobile, please follow the guidelines below to buy crypto futures on the MEXC App:

  • TapMEXC App, point on “Futures” at the bottom menu

  • MEXC Futures Trading Terminal provides all required tools for every trader for free. Terminal is user-friendly and provides all needed information at a glance.

From MEXC Web:

From MEXC App:

As shown in the image above:
No. 1 points to the menu bar at the top, which allows you to pick the trading pair of futures that you want to trade.
No. 2 points to the bottom part of the screen, which holds your position and order details
No. 3 points to the order book on the left of the screen, which allows you to get an overview of what other brokerages are buying and selling so that you know what is happening in the markets at the moment.
No. 4 points to the order placement button which is at the right of the screen.

3. Trading Futures on the MEXC

  • To start trading on MEXC Futures, you have to transfer funds from your spot account to your derivatives (contract) account to trade futures

  • When booking an order, you specify the price and quantity of assets you want to trade and confirm by pressing the “Buy/Long” or “Sell/Short” options

  • The futures options offer different leverage rates on different trading combos

  • The MEXC Exchange supports leverages of up to 200x trade. The maximum leverage depends on the initial and maintenance margin

  • The Exchange allows user to change their long and short positions in cross margin modes. For instance, the long position is 30x, and the short position is 90x. To hedge against risk, the trader can adjust the trade leverage from 90x to 30x

  • The platform supports traders with different margin preferences by offering different margin modes.

    • The cross-margin mode shares margins with two positions opened against the same cryptocurrency. Any profit or loss from a position can be used to adjust against the balance of the other trade.

    • The isolated marginonly accepts margin against a position opened. In case of loss, the trade will only lose against the specific position on settlement. This leaves the balance of cryptocurrency untouched. This is the best option for all new traders since it protects the main crypto coin balance.

  • As a default setting, all traders start trading in isolated margin mode.

4. Why traders choose Futures?

Future trading offers a lot of advantages that appeal to all investors. Since they are financial derivatives that base their value on a financial or physical asset, they are excellent for risk management and hedging in cryptocurrency mining and trading. This risk cushioning makes futures trading more risk efficient.

Disclaimer: The materials are not related to the provision of advice regarding investment, tax, legal, financial, accounting, consulting, or any other related services and are not recommendations to buy, sell, or hold any asset. MEXC Learn solely provides information, but not financial advice. You should ensure that you fully understand the risk involved before investing.

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