How to Develop a Winning Plan When Trading Crypto Futures
When a beginner trader hears about futures, one may fear trying this advanced trading method. In this article, we will try to provide you with a systematic approach to how to come up with a strategy and not forget any important detail in this complex trading method.
Before we start, we would like to recommend to you a reliable crypto futures exchange where you can take advantage not only of low fees and a variety of traded assets but also futures with no end date – perpetual trading crypto.
What is Perpetual Trading Crypto?
Perpetual contracts act as a comparable alternative to traditional contracts, but with a distinct feature – they do not have an expiration date. This unique characteristic allows individuals to engage in continuous trading of these contracts. The profitability of perpetual trading contracts is determined by the funding rate, which is dependent on the asset’s price during the calculation period. This financing mechanism not only enables traders to earn profits but also helps maintain the correlation between the price of the underlying asset in the contract and the prevailing market price. When prices are rising, users with short positions compensate users with long positions. Conversely, if prices decline, the payments are made in the opposite direction.
How to Create a Good Plan?
Crafting a successful blueprint for trading necessitates careful consideration and a systematic approach. Below are several crucial steps to assist you in formulating an efficient plan:
- Gain a comprehensive understanding of cryptos, futures, and trading methodologies. Stay informed about the latest news and advancements in the crypto industry.
- Establish clear and realistic objectives. Determine your risk tolerance, desired returns, and time commitment for trading.
- Select a trading strategy that aligns with your goals and risk tolerance. Popular strategies include trend following, mean reversion, and breakout trading. Specify entry and exit criteria based on your chosen strategy and indicators.
- Utilize historical data to test your trading strategy. Apply your strategy to past market data to evaluate its performance. Engage in paper trading or use a simulated trading platform (such as the WhiteBIT crypto futures trading platform with its demo trading accounts) to test your strategy in real-time without risking actual funds. This allows you to gain confidence in your approach.
- Determine the appropriate position size based on your risk tolerance and the specific trade setup. Establish suitable stop-loss levels to protect against excessive losses. Consider utilizing a risk-reward ratio to ensure that potential profits outweigh potential losses.
- Consistently adhere to your trading plan, regardless of short-term market fluctuations. Exercise control over emotions such as fear and greed, as they can lead to impulsive and irrational decisions. Implement sound risk management techniques to mitigate the impact of emotional decision-making.
- Stay updated on market trends and emerging trading strategies. Learn from successful traders and consider joining trading communities or forums to exchange ideas and insights.
Remember, constructing a winning trading plan requires time and experience. Practice patience, employ prudent risk management, and continuously refine your strategy based on your own observations and the valuable lessons you learn along the way.