Disclaimer: The content provided in this guide is for informational purposes only and does not constitute legal, financial, or investment advice. Trading futures and using leverage involve high risk, including the possibility of losing more than your initial investment. BTSE does not offer investment advice, and users should consult with qualified professionals before making trading decisions. Markets are volatile, and trading futures carries significant risks. Trade cautiously and within your financial means.
Table of Contents
- Introduction to Crypto Futures and Things You Should Know First
- Getting Started on BTSE
- Why Stop Loss and Take Profit Conditions are So Important
- Advanced Features
- Closing Thoughts
Introduction to Crypto Futures and Things You Should Know First
What are perpetual futures?
Often referred to as “perps”, perpetual futures are trading instruments that offer users the chance to speculate on the price of crypto, in either direction. However, trading these instruments carries substantial risk, particularly when leverage is used. Users must understand the complexities and risks before participating.
What is leverage?
Leverage is a tool used in finance to amplify the returns of a trade. It allows traders to open positions that are larger than their initial capital by borrowing funds. This is common across all asset classes in trading: crypto, stocks, FX, commodities etc.
In very simple terms, to understand the general concept, leveraged trading allows users to trade on margin. For example, if you plan for a $100 trade and use 7x leverage, essentially you will be trading with $700 ($100 x 7) . So, if the value of the token you bought goes up by 10%, instead of earning 10% of $100 ($10), you could earn 10% of $700 ($70). Of course the calculations are a bit more complex than that, but that’s the general idea.
Here, we take on 15x leverage for a Bitcoin perpetual futures position.
Risk Warning: Leveraged trading is inherently risky and may not be suitable for all investors. Only trade with funds you can afford to lose.
How to open a leveraged perps trade?
When a trader opens a leveraged position:
- Deposit: initial margin represents the funds you deposit into your trading account.
- Leverage: set the amount of leverage you wish to use.
- Trade: you can then enter a trade that is a multiple of your initial margin.
What are the risks of using leverage?
Whilst leverage can amplify your profits, it also increases your risk. Just as leverage multiplies potential profits, it also magnifies potential losses.
What is a liquidation and how does it work?
If your losses exceed your available balance, your position will be liquidated, reducing your account value to zero. In basic terms, say your balance is $100 and you use 7x leverage. You would be trading with $700. Automatically, when your trade loses around 14.2%, you lose $100, and your account would be 0.
What is my maximum loss?
You can only lose the amount you deposit as initial margin. BTSE assumes the risk of closing out your position automatically (liquidation) and should you owe more than the balance in your account then we cover it.
What are some other things I should know?
- Liquidation price: this refers to the estimated price at which your position will be automatically liquidated by BTSE. If you buy (long), the liquidation price will be lower than the price you enter the trade. If you sell (short), the liquidation price will be higher than the price you enter the trade.
- High leverage: as stated previously, the higher the leverage the higher the risk. Higher leverage trades should generally only be used for short-term gains. General Tip: The higher the leverage, the shorter time frame that you should hold the position.
- Initial margin: the amount of funds you need in your trading account to open a position.
- Maintenance margin: the amount of funds you need to have available to avoid liquidation. For example, if your position is nearing the liquidation price, you can add more funds to protect your position and adjust the liquidation price.
What if I need more help?
We are always here to help and educate traders. Reach out to your BTSE contact, or you can send us your questions partnerships@btse.com.
Getting Started on BTSE
How to Set Up Your BTSE Account
First, go to www.btse.com and register for an account. Alternatively, you can download the BTSE app on the Google Play or Apple App Store.
At the sign-up page, you can register for an account with either an e-mail address, mobile phone number, or Google / Apple accounts. If you do use a mobile phone number, please remember that if you use a VPN in the future, the location of the IP address has to match the country of the mobile phone number.
After receiving a verification e-mail or text message, you can follow the instructions to complete registration. You’ll be prompted to pass the KYC process, but note that this is only required if you wish to buy crypto with fiat or government issued money (e.g. USD, Euro, GBP) , or plan to sell crypto for it. You do NOT need to pass KYC to trade futures on BTSE. Non-KYC’ed individuals can withdraw up to $100,000 USDT daily. Please refer to the KYC Limits Chart.
Funding Your Futures Wallet on BTSE
After logging in to your BTSE account, go to your Futures Wallet and ensure you have enough money there.
If not, click on “Transfer” to transfer money from your Spot Wallet to your Futures Wallet.
If you DON’T have enough money in your Spot Wallet, you’ll need to top up by transferring crypto from another platform or buying crypto on BTSE.
Understanding the Futures Trading Interface on the BTSE Platform
- Menu
- At the menu, you can easily access other BTSE functions or navigate to different Futures contracts.
- Price Chart
- On the Price Chart, you can see how the price for your contract is moving.
- Trading Activity & History
- To see active positions, orders, and past trades, you can check the Trading Activity & History section at the bottom.
- Order Book
- The Order Book in the middle shows recent orders that are being put in by other traders; after a trade is connected with a counterparty, it is deleted from the order book.
- Order Entry Field
- The Order Entry Field is where you input conditions like Price, Size, Take-Profit and Stop-Loss Conditions, etc. This is where you set up your first orders and positions. Note that you can switch between Cross Margin and Isolated Margin at the top. You can also adjust leverage and the size of your position by using the slider.
- Asset Details
- This section shows you how much money you have invested in a particular contract, and how much is remaining in your Futures Wallet balance for deployment.
Placing Our First Futures Order
In this scenario, we use 26% of our available balance on a BTC-PERP, 100x leverage position (129 USDT). We set a take-profit mark at a Bitcoin price of $60,000 and a stop-loss mark at the $56,500 mark. Note that it shows you how much money you’d make or lose if either of these conditions are hit.
Note that you can look at the Asset Details section to see how much margin you’ve invested in this particular contract, and how much you have remaining in your Futures Wallet balance for deployment.
Sometimes you might not have enough margin invested to avoid liquidation if the market goes down. In the next section, we’ll go over how to add margin and reduce leverage after a position has already been established.
Adjusting Margin & Leverage
Let’s take a look at the position we just built.
We put in a margin of 122 USDT after fees, but leverage amplifies that by roughly 100x, so the value of the position is 12,292 USDT.
Note that the Mark Price is close to the Liquidation Price; if it hits it, then our position is liquidated and we lose the entire margin.
Let’s try adjusting the Margin. If we increase the Margin (investment) by 75%, we are taking more money from the Futures Wallet balance and putting it here. Note that if we add another 272 USDT, it brings the position margin to 395 USDT. This lowers the Liquidation Price to roughly $56,051, lowering our risk of getting our position liquidated.
We recommend putting substantial margin into every futures position, and using Isolated Margin mode for each contract to control risk.
Let’s dive deeper into some of the terminology you should understand.
What Order Types Are Available and When to Use Them?
When placing your orders, you have a range of options to choose from:
Limit Order
A limit order is an order placed on the order book with a specific limit price. When you place a limit order, the trade will only be executed if the market price reaches your limit price (or better). You can use limit orders to potentially buy at a lower price or to sell at a higher price than the current market price.
In general, you can try to be patient to get a better price than what the market price is. This means that if Bitcoin is trading at $66,000, you can place a limit order slightly below at $65,900, which will wait until the price falls to execute. You can place limit orders at night before you go to sleep and see if it hits the mark.
Market Order
A market order is an order to buy or sell at the best available current price. It is executed against the limit orders previously placed on the order book. When placing a market order, you will pay fees as a market taker.
Traders place market orders if they’re looking to make an immediate purchase or exit a position immediately.
Stop-Limit Order
Let’s break down a stop-limit order into its stop price and limit price. The stop price is the price that triggers the limit order, and the limit price is the limit price of the triggered limit order. This means that once your stop price has been reached, your limit order will be immediately placed on the order book.
Although the stop and limit prices can be the same, this is not a requirement. In fact, you could set the stop price (trigger price) slightly higher than the limit price for sell orders or slightly lower than the limit price for buy orders. This could increase the chances of your limit order filling, after it reaches the stop price.
Stop Market Order
Similar to a stop-limit order, a stop market order uses a stop price as a trigger. However, when the stop price is reached, it triggers a market order instead.
Take-Profit Market Order
Similar to a take-profit limit order, a take-profit market order uses a stop price as a trigger. However, when the stop price is reached, it triggers a market order instead. You can set a take-profit market order under the Stop Market option in the order entry field.
Take-Profit Limit Order
A take-profit limit order is similar to a stop-limit order. It involves a trigger price, the price that triggers the order, and a limit price, the price of the limit order that is then added to the order book. The key difference between a stop-limit order and a take-profit limit order is that a take-profit limit order can only be used to reduce open positions.
A take-profit limit order can be used to manage risk and lock in profit at specified price levels. It can also be used together with other order types, such as stop-limit orders, enabling you to have more control over your positions.
Please note that these are not OCO orders. For example, if your stop-limit order is hit while you also have an active take-profit limit order, the take-profit limit order remains active until you manually cancel it. You can set a take-profit limit order under the [Stop Limit] option in the order entry field.
Trailing Stop Order
A trailing stop order helps you lock in profits while limiting potential losses on your open positions. For a long position, this means that the trailing stop will move up with the price if the price goes up.
However, if the price moves down, the trailing stop stops moving. If the price moves a specific percentage (called the callback rate) in the other direction, a sell order is issued. The same is true for a short position but in reverse. The trailing stop moves down with the market but stops moving if the market starts going up. If the price moves a specific percentage in the other direction, a buy order is issued.
The activation price is the price that triggers the trailing stop order. If you don’t specify the activation price, this will default to the current Last price or mark price. You can set which price it should use as a trigger at the bottom of the order entry field.
The callback rate is what determines the percentage amount the trailing stop will “trail” the price. So, if you set the callback rate to 1%, the trailing stop will keep following the price from a 1% distance if the trade is going in your direction. If the price moves more than 1% in the opposite direction of your trade, a buy or sell order is issued (depending on the direction of your trade).
One-cancels-the-other Order (OCO)
A one-cancels-the-other (OCO) order is a pair of conditional orders. The scenario is that if one order executes, then the other order is automatically canceled.
An OCO order often combines a stop order with a limit order. This helps to minimize potential losses.
Index Order
Index Orders let traders place orders based on a percentage above or below the BTSE index price, setting a Minimum and Maximum Price. Example: for an Index Buy Order: If the maximum price is set at $27,000 and the BTC index is $26,900, the order executes at $26,900.
Why Stop Loss and Take Profit Conditions are So Important
When placing a futures order, you really need to set up a stop loss condition.
This is because markets are volatile and you could very easily lose your entire investment in the span of a few hours if you don’t watch the markets carefully.
In this scenario, Bitcoin is trading at $57,615; we set a stop loss at $56,500, meaning the entire position is exited at that point and you take a loss of 240 USDT.
While this may seem painful, if Bitcoin dropped even lower to $55,000, you’d get liquidated and lose your entire balance of >400 USDT. Stop loss conditions enable you to cut your losses so you can live to fight another day.
With naked futures positions with no stop loss conditions, you could very well lose your entire balance and run out of money.
You can also adjust take profit / stop loss conditions after they’ve been set – we illustrated this in the above Adjusting Margin & Leverage section.
But let’s take another look at how we can use the interface to calculate the profits and losses we’d incur if the trigger prices are hit. After you click the pencil icon next to the TP/SL field in your existing position, this window pops up:
In the field we change the take-profit and stop-loss conditions to $63,000 and $55,000. If it hits the top end of the range, the sell order automatically executes and you take a 1135 USDT profit. If it slides to $55,000 and triggers the stop loss order, then the sell order executes and you take a loss of 572 USDT.
Advanced Features
One-Way Mode vs Hedge Mode vs Multiple Mode
In Hedge mode, you can simultaneously hold long and short positions for a single contract. A trader may do this if they’re bullish on an asset long-term but bearish in the short term. With Hedge mode, your quick short positions won’t affect your long positions.
The default position mode is the One-Way mode. This means that you can’t open both long and short positions at the same time for a single contract. If you tried to do so, the positions would cancel each other out. If you want to use Hedge mode, you’ll need to enable it manually like so:
- Go to the top right of your screen and click on the gear icon (Settings).
- Near the bottom, click the pencil icon to adjust position mode.
- Select [Hedge Mode]. You’ll then be allowed to set up long and short positions for the same futures contract. Please note that if you have open orders or positions, you won’t be able to adjust your position mode.
Multiple Mode
At the same menu, you can also select Multiple Mode.
The Multiple Mode permits traders to simultaneously hold multiple long and short positions in the same market. Each position has its own independent margin and leverage settings. This enables increased flexibility when opening positions, because it ensures that each entry price remains independent across different positions. Please note: currently, a maximum of five positions and orders can be opened simultaneously for a single market.
This is important if you decide to deploy trading bots. You’d be able to run two long BTC-PERP trading bots, two short BTC-PERP trading bots, and run a manual fifth position of your choice.
What is the Funding Rate and How do I Check it?
The funding rate ensures that the price of a perpetual futures contract stays as close to the underlying asset’s (spot) price as possible.
Essentially, traders are paying each other the funding rate, depending on their open positions. What dictates which side gets paid is determined by the difference between the perpetual futures price and the spot price.
When the funding rate is positive, the longs pay shorts. When the funding rate is negative, the shorts pay longs.
Depending on your open positions and the funding rates, you’ll either pay or receive funding payments. Funding payments on BTSE are paid every 8 hours. You can check the time and the estimated Funding Rate of the next funding period at the top of the page, next to mark price.
If you’d like to check the previous funding rates for each contract, go to the Contract Details section in the bottom right hand corner of the page and click on Funding Rate History.
Getting Liquidated – What Happens, and How Can I Prevent This?
Liquidation happens when your margin balance falls below the required maintenance margin. The margin balance is the balance of your Futures Wallet, including your unrealized PnL (Profit and Loss).
So, your unrealized profits and losses from futures positions will cause the margin balance value to change. If you’re using Cross Margin mode, this balance will be shared across all your positions.
If you’re using Isolated Margin mode, this balance can be allocated to each individual position. We recommend using Isolated Margin mode for your trades to protect your Futures Wallet balance; though you might have to invest more into each position to reduce the risk of liquidation.
The maintenance margin is the minimum value you need to keep your positions open. It varies according to the size of your positions. Larger positions require a higher maintenance margin.
When liquidation happens, all of your open orders are canceled and your position is exited, using up your margin balance to pay the money you owe.
Ideally, you should keep track of your positions to avoid auto-liquidation, which comes with an additional fee. If your position is close to being liquidated, consider manually closing the position quickly through a market order instead of waiting for the auto-liquidation process.
You’ll take a loss but hopefully won’t lose your entire balance, and you can live to trade another day.
Closing Thoughts
Traditional futures contracts are derivatives that give traders the obligation to buy or sell an asset in the future. The biggest benefit of trading futures is leverage – you can enlarge your trading positions and make outsized gains, but at the risk of liquidation and losing your entire investment.
Derivatives can be confusing for inexperienced traders, so it’s crucial to understand how these contracts work before taking financial risks. We strongly recommend that traders educate themselves and utilize the TestNet on BTSE to practice futures trading strategies without risking real funds. Always trade with caution, assess your risk tolerance, and consider seeking advice from financial professionals.
For other tutorials and resources, visit our Education page here.
Our aim is to create a platform that offers users the most enjoyable trading experience. If you have any feedback, please reach out to us at support@btse.com or on X @BTSE_Official.
Disclaimer: BTSE blog content is intended solely to provide varying insights and perspectives. It does not constitute financial, legal, or investment advice and should not be relied upon as such. The views expressed are not necessarily those of BTSE. Unless otherwise noted, they do not represent the views of BTSE and should in no way be treated as investment advice. Trading involves substantial risk due to market volatility, and past performance is not indicative of future results. Always trade with caution and consider seeking advice from a qualified professional before making any financial decisions.
