Binance futures are crypto futures that enable traders to trade digital currencies without actually possessing the underlying assets. Futures in cryptocurrency work similarly to futures in equities and stock indices.

Binance futures derive their future price from the underlying crypto asset, like Bitcoin, Ethereum, Bitcoin Cash, Litecoin, etc.

Types of Futures Exchange Contracts

Binance offers two types of futures contracts:

  • Coin-M Futures: These are perpetual or quarterly contracts settled in Cryptocurrency Perpetual Delivery

  • USD-M Futures: These are perpetual or quarterly contracts settled in USDT or BUSD.

In case you’re not familiar with perpetual and quarterly futures contracts, here is a quick explanation.

These are quarterly contracts that come with a three-month expiry. Thus, they expire every three months.

Perpetual contracts are a new type of futures contract that has no expiry date. Therefore, traders can hold these contracts for as long as they want to do.

Leverage Trading

Leverage is an important element of Binance trading. Binance offers up to 125x leverage on Binance futures. This means you can take a position 125x larger than your initial margin.

For example, if you have an initial margin of 1 BTC, you can hold futures worth 125 BTC. This multiplies your profitability by 125x. But on the downside, it also exposes you to a potential loss of 125x. Therefore, high leverage is better for risk-averse traders.

Furthermore, crypto derivatives are subject to high volatility and price fluctuations. Therefore, leverage trading futures contracts can involve significant risks of losses. It’s essential to effectively manage risk-reward when trading derivatives with leverage.

Binance currently offers more than 90 contracts across USDT and coin-margined instruments.

How Do Binance Futures work?

Binance futures work the same as equity and stock indices futures. Futures (along with options) are known as derivatives, as they are derived from the underlying crypto asset. Derivatives allow you to leverage crypto price changes to earn profits without actually holding the assets.

If you already know about how futures work, you can skip to the next section. If not, then hang in there, as we’re going to discuss the working of Binance futures with a real-life example.

Suppose you believe that a crypto asset — suppose Bitcoin — will surge by USD 1,000 in value over the next month, but you don’t hold any Bitcoin. One option is to buy Bitcoin and wait for its value to surge directly. The next option is to buy its futures contract (BTCUSD).

Please note that the underlying asset (Bitcoin) and its futures contract (BTCUSD) are different products and trade at different prices.

Binance Futures Pricing Explained

In case you’re curious, here’s how crypto futures price is calculated:

  • Crypto Futures Price = Crypto Spot Price x [1 + Rf (x/365)]

Here, Rf is the annual risk-free rate, and x is the number of days to expiry.

Since a perpetual futures contract doesn’t have an expiry date, Binance (along with other exchanges) implements a funding rate mechanism to ensure that the futures entry price stays close to the spot price. Futures contract buyers and sellers need to pay a funding fee for that.

While futures are supposed to trade close to the spot’s price, it’s not always the case. Sometimes, it may trade at almost the same price as the underlying asset. And sometimes, it may deviate significantly from the spot price.

The differences occur because the crypto market is subject to immense volatility and sudden price fluctuations. But let’s assume that, for the most part, the futures price stays close to the spot price.

Now, let’s return to buying Binance futures. So, suppose you feel that Bitcoin’s price will increase by USD 1,000, so you buy five BTC futures contracts.

If your prediction turns out to be true and Bitcoin surges by USD 1,000 and the futures entry price also increases by USD 1,000, you’ll earn a profit of USD 5,000. And you made this profit without holding any Bitcoin at all.

That is, in a nutshell, how Binance futures work.

How To Trade Futures Contracts on Binance?

Now that you’ve understood what Binance futures are and how they work let’s talk about the registration process and how you can start trading futures.

To trade Binance futures, you’ll need a Binance Futures account. To open that account, you’ll need first to open a regular Binance account. You can click the link below and create a regular Binance account with your email address.

Once you are logged into your Binance account, select “Derivatives” and then select the futures category (USD-M futures or COIN-M futures) you want to trade. You’ll find an “Open Now” option. Click on it, and your Binance futures account will be activated. You’re now ready to trade Binance futures.

The next step is to fund your Binance futures account. Please note that Binance has a distinct Futures wallet. However, you can easily transfer funds from your Exchange wallet to the Futures wallet.

You can fund your Binance futures account with cryptocurrencies or fiat currencies. Once you have funds in your Futures account, you can start trading futures.

Please note that Binance doesn’t charge any deposit and withdrawal fees. However, blockchain network fees are payable when withdrawing funds from your Binance account.

Now, head to the Derivatives tab and click on the futures you want to trade. You’ll be directed to the Binance futures platform, where you’ll find the price chart of the BTCUSD contract by default. You can click on the contract name to change the futures contract you want to trade.

From here, you can buy or sell futures, select order types, set leverage, conduct technical analysis, etc.

Binance has ten Binance futures account levels (VIP 0 to VIP 9) based on 30d trade volume and/or BNB balance. Based on the account level, Binance charges trading fees. Binance uses a market maker-taker fee structure for USD-M and COIN-M futures.

How to Use the Binance Futures Platform?

Binance uses a sophisticated Binance futures trading platform in the crypto space. Let’s quickly walk through how the Binance futures platform operates and utilize them to make your trading more effective.

Futures Trading Platform

Binance’s trading terminal comprises an advanced price chart that comes with all the essential features and functionalities. Binance uses two charting systems — one is its proprietary charting system, and the other is TradingView.

Both charting systems are equally good, have an intuitive Binance futures trading interface, and share similar features, including:

  • Multiple chart types — line, bar, candlesticks, Heikin-Ashi

  • Multiple time frames

  • A comprehensive suite of technical indicators

However, TradingView offers some extra tools and indicators, making it ideal for professional traders.

The trading terminal also provides information such as:

  • Mark price

  • Index price

  • 24h change

  • 24h high and 24h low

  • 24h volume

  • Time do delivery

  • Market depth