As we announced the launch of our public testnet and inch closer to opening the gates, things are starting to get real at last! You may find yourself wondering how to buy futures or indeed, what futures really are. In this article, we explain the basic concepts, how to buy futures, the types of contracts, and all you need to know to get into stock futures investing.
For a more in-depth overview of futures and futures trading, check out our how-to guide here. However, the basic premise is this: Think of futures contracts as agreements between two parties to trade an asset (in this case Bitcoin) for an agreed-upon price in the future.
Trading futures has many benefits and started out as a way of allowing large companies, farmers, oil producers, etc. to hedge their commodities’ value against price fluctuations. Say an oil producer believes that the price per barrel will drop significantly in the next six months. He can enter a futures contract to sell at today’s price in six months to secure his profit. Of course, he loses out if the price rises. Trading futures is always a gamble, even more so in the cryptocurrency space.
There are many different types of futures contracts, including physically settled and cash-settled, as well as daily and monthly settled and perpetual swaps. Until Bakkt makes its entrance in September of this year with the first physically settled Bitcoin Futures market, all futures in the crypto space are cash-settled. This means that the traders pay each other the difference instead of physically delivering the underlying asset (Bitcoin).
While some traders are looking to hedge on price, most modern futures traders are speculators looking to trade on price fluctuations and make cash profits, rather than taking custody of the underlying asset (i.e. barrels of oil, bars of gold, or even bitcoins). This would be a physically-settled contract and is more applicable to institutional space, agricultural or airline industries, for example.
What are perpetual swap contracts? Perpetual swaps have no expiration date, unlike daily or monthly settled futures contracts. This makes them easier to understand for retail traders and they will be the main focus of the Digitex Futures exchange. As Adam stated in the AMA about the testnet:
“With a futures contract that may not expire for another month, there’s a premium because the spot price is further away from the contract price. Also, at settlement, there’s a need to settle the old contract and then open a new contract. Perpetual swap futures are the way forward for attracting retail traders and therefore, ensuring volume.”
The futures market globally is now enormous and growing all the time according to the Futures Industry Association, with futures traded against stocks, Forex, cryptocurrencies, indices, bonds, gold, and more.
If you were asking questions like, what are stock futures, what is day trading futures, and how to buy futures, it helps to have an overview of the different types of markets first–as well as the tools that good futures traders use to magnify their profits.
You can buy futures contracts through a traditional broker or online from an abundance of sites that make trading simpler and easier, cut out intermediaries and lower costs. On the Digitex Futures exchange, you’ll be able to buy cryptocurrency futures with zero commissions on all trades–a first for both the crypto and the futures industry.
Futures traders often use tools like margin and leverage to increase their profit sizes. Borrowing funds from an exchange to take a bigger position can be risky and highly leveraged traders can get blown out in volatile markets. However, leverage does give skilled traders the chance to make a lot of money fast and greatly magnify their winnings. This is why 100x leverage has become so popular in the cryptocurrency markets.
How to Buy Futures on the Digitex Exchange
On the Digitex exchange, you can buy futures using DGTX only. This means that you’ll need to know where to buy ether, first of all, to purchase DGTX and then all your profits and losses will be denominated in DGTX.
As Adam highlighted in his AMA, you will be buying a perpetual swap contract, which will be a dollar’s worth of DGTX tokens and has no expiration date. We are still finalizing the futures contract specifications, however, they will be essentially the same as other major futures exchanges such as BitMEX and Bybit to make it easier for their traders to switch over to Digitex. We want to make it as simple as possible to create winning traders and to allow them to trade successfully.
Skilled traders are used to trading futures for profit. It takes time and discipline, but even you’re just starting out, earning some extra income from day trading futures is certainly within your reach, especially on a platform that charges no commissions and has no mechanical edge working against you.