Futures Trading is all in the name — the trade you execute will take place in the future, instead of right now. Unlike its Spot Trading counterpart, the current price of a commodity is not the price at which a deal takes place - instead, the price will be what it is on the date and time at which the two parties agree to execute the deal, allowing traders to speculate on the direction of a commodity into the future. Here’s how it works:
Futures Trading allows users to complete crypto transactions based on their future predictions for the markets they are investing in. Simply put, if a user believes that the price of a token is going to rise, they are able to create a contract that allows them to create a purchase with a view to selling it at a higher price in the future. The same is true for token prices that are predicted to fall — users can sell their current positions with a view to buying them back at a lower price.
Let’s take an example in the form of a Bitcoin Futures contract. The current spot price, in March for example, of the token is $100. The user buys 10 tokens, giving them an asset of $1,000 in Bitcoin tokens. However, the user predicts that this current position will go up in the future, so they wish to trade in a Futures contract. They trade a Bitcoin Futures contract that will expire in July against the 10 tokens that they currently own.
When July comes, and it’s time to settle the contract, the current position of the tokens will be considered. If the current position is now $150, the user will make a $500 profit as their overall tokens value will now be $1,500. However, if the position is now $50 per token, the user will make a $500 loss. The principle of Futures Trading remains — a token’s future position is predicted, and a trade is made against it.
Futures Trading is a chosen method for traders that may have a good indication about the direction at which a price is heading. If a trader believes that a token is currently trading at a price that is lower than its true value, they can buy a stake in that token, and using a Futures contract sell the token at a later date for an increased price. Again, the same is true for if a token’s price is higher than expected in the eyes of the trader — they can sell their stake and look to buy it back at a lower price in the future.
This kind of trading, whilst also carrying greater levels of risk, carries great opportunities. If a trader truly feels that they know their market, they have a tremendous chance of reaping the benefits of their knowledge in the form of increased returns.
To trade Futures contracts on ZB.com, you will firstly need to set up your account, with a deposit address linked to the account. Details on both how to set up a deposit address and how to create your first deposit can be found in ‘Account Information’ on the platform.
Once you have completed the steps required to set up your account, head to the ZB.com desktop platform, or open the ZB app. On desktop, log in to your account and then head to ‘Derivatives’ at the top of the page. From here, select ‘Perpetual Futures’ and navigate the trading page to your preferences. On the app, log in to your account and select ‘Future’ on the first landing screen to start trading.
