The cryptocurrency market is in a buzz for a lot of good reasons. Recently, the Bitcoin price has touched its all-time high of $41,793.73. However, this is not the only currency that is performing so well. Today, many cryptocurrencies are performing well in which users can invest to get good returns.
Generally, cryptocurrency users or traders do trading on the current rate of cryptocurrencies. They keep a close eye on the market and place bids to get instant delivery of cryptocurrencies in their wallet. What is important to keep in mind here is that to trade in the spot market, you have a sufficient amount of money in your wallet to execute the trade.
But, what if you do not have sufficient funds in your wallet or you do not want to invest all your money in one place? This is where the concepts of futures trading come into focus. Continue reading this blog to know what it is and how you can book profits with little investment.
What is PCEX Futures?
Futures is a kind of derivative market in which instead of buying and selling cryptocurrencies on the same day, buyers and sellers enter into a contract to buy and sell assets at a certain time in the future at a certain price.
Let’s understand this with an example. Let’s say, you have bought a futures contract of XRP/C2USD consisting of a lot of 100 XRP at Rs. 50 each expiring at a specific date. So the contract value of 1 lot is Rs. 5000. At the expiry of the contract, the buying price for you for those 1 lot size futures contracts will remain Rs.5000, irrespective of the current prevailing price. This means that even if the price of the contract goes up to Rs. 60/each, you will get a profit of Rs. (100*10)= Rs.1000 at the end of the expiration of the contract. If the price of the contract falls to Rs. 40/each, you will incur a loss of Rs. (100*10)= Rs.1000.
Futures contracts are exchange-traded, standardized contracts. This means that buyers and sellers have no right to create or modify contracts as per their convenience. The exchange here plays the role of a third party to eliminate counterparty risks.
When talking about futures trading, the mechanism is almost the same in all cryptocurrency exchanges. However, PCEX Futures is quite different from the way futures are executed on other cryptocurrency exchanges.
Working on the NSE and BSE business model, PCEX Futures allows users to buy and sell futures contracts of cryptocurrencies in lot sizes and specific margins are required wherein other cryptocurrency exchanges allow users to utilize leverage offered by them to enter into futures contracts. Though it looks the same to most of the traders, however, the fact is that it is not.
Let’s understand this with an example.
Let’s say that you have a future contract of 1 lot size of 100 XRP at Rs. 50 each. Then the total amount you need to spend to own that contract is Rs. 5000. PCEX Member allows its users to own any futures contracts at the minimum margin rate. Let us suppose that the minimum margin required to own a futures contract of XRP having a lot size of 100 is 5%, then you can own that contract even when you have Rs. 250 in your wallet. If you want to sell that futures contract, you can get peace of mind that a seller will surely be available on PCEX Futures to buy your contract in 1 lot size.
However, you bought a future contract using 10x leverage as available on other cryptocurrency exchanges. It may be possible that not all buyers are ready to buy that contract at 10x leverage at a time. Chances will be high that you may not be able to sell the futures contract at 10x leverage or compromise to sell the contract at low leverage.
The important terms you need to keep in mind while investing in PCEX Futures include
- Lot Sizes: Quantity of financial assets as set out by an exchange for buy/sell in a single transaction
- Expiry Date: The date upon which a futures contract expires
- Margin Rate: Rate of margin is the little percentage of the total purchase price of the futures contract that must be covered by cash while buying a futures contract
- MTM: Mark to Market is a method of valuing positions and determining profit and losses that are settled in each trading day
What are the Benefits of Trading in PCEX Futures?
When you are planning to invest in PCEX Futures, you should also be aware of what are the benefits you are going to get in. Certainly, there are a lot of benefits of investing in PCEX Futures like leverage. However, futures trading is risky too. As most of the brokers offer high leverage so traders usually prefer to take a large position to get benefits instantly. However, if the market will not go well as expected, the loss could be huge.
Futures trading is basically speculation of the future price movement of the asset and no one can say anything certain in which way the market will move. But, this does not mean that futures trading is not beneficial. Some of the benefits of futures trading include but not limited to just
- Investors can predict the future price in the direction of the underlying asset price in the market.
- Traders can book maximum profits by investing a little
- Investors can save paying upfront by leveraging margin
Always keep in mind that the cryptocurrency futures market is highly volatile. Traders can end up with unlimited profit or loss. One needs to have adequate knowledge of the market, great speculation skills, and risk-taking abilities to trade successfully in the PCEX Futures market.
How to Trade Futures on PCEX Member?
- Before starting futures on PCEX Member, you need to have a regular account on PCEX Member. If you do not have one, you can visit PCEX Member and click the Join Us button given on the right corner of your screen.
- When you are ready click on the Next button.
- You will receive a verification email shortly on your registered email ID. Click the verify your email button to complete your registration.
- Next, login to your PCEX Member account using your credentials and you are now ready to trade in the PCEX futures.
- Accept the terms and conditions and click on the confirm button to start your trading journey in PCEX Futures market.
- Start exploring the C2USD margined futures products.
- If you don’t have C2USD in your PCEX Member wallet, buy C2USD in the INR market.
- Once the INR gets deposited, select the contract you would like to buy in the futures market. Let’s take BTC/C2USD as an example.
- Select the order type, number of lots you would like to buy, and the disclosed quantity and click on the buy button.
- Place your order by clicking on the confirm button. Once your order gets matched, your order will be successfully placed.