Advanced Crypto Futures Trading Techniques | Advanced Strategies for Futures Trading

Crypto futures trading is all about derivatives products. One attractive element of futures contracts is the leverage. This element enables traders to multiply their initial capital from x2 to x50 and even more. Leverage is crucial to determine the contracts' liquidation prices and to understand how the long and short sides cause the price movements.

By using leverage and advanced strategies, crypto traders can reap substantial profits. This article will try to serve traders as a guide to get into crypto futures with remarkable techniques.

Before start, it is pertinent to note that:

• High leverage involves higher risks.
• Low leverage is more manageable.

Crypto Futures Trading Overview

These are called perpetual contracts, which allow traders to enter trades in either direction they want upside (long) or downside (short).

Such contracts present a highly speculative method to capitalize on short-term and mid-term market price fluctuations. Traders can forecast a market decline and go short. In the case of a market rise, they go long.  

Traders can perform different strategies, from trend-following under swing trading frameworks to intraday trends and those that belong to high-frequency like scalping.

Characteristics of Futures Contracts

• Margin: the capital available to risk.
• Leverage: the capacity to multiply the margin to generate higher gains at the expense of higher losses. High leverage tightens the liquidation price, while low leverage leaves more room.
• Liquidation Price: refers to the price strike that closes a position automatically if the trader does not add more margin since it requires more to maintain the contract.
• Isolated mode: it allows traders to open positions with a determined portion of the balance, and liquidation will be settled based on that portion.
• Cross-mode: it allows traders to perform with the total balance, allowing their position to take margin automatically if required.
• Expiration: the date the contracts settle, regardless of profit and loss.

Long Vs. Short: Unveiling Futures Trading

The volatile action of the markets moves the asset's price upward and downward. The futures market permits to capitalize in either direction. The liquidation price and leverage are essential to the assets' price fluctuations.

Understanding the long and short sides is crucial to spot opportunities in the weak zones where the market is likely to liquidate the most leveraged positions and traders, moving the price sharply for a while.

Typically, after a market's liquidation squeeze, the price reaches strong zones where the price is likely to bounce from. Such a dynamic between liquidation runs and strong zones shapes the market structure and births out terms like breakout, ranges, support and resistance.

What does it mean when one of the sides is stronger than the other? 

When longs increase, it suggests high demand. Conversely, when shorts increase, it implies a high supply. Two scenarios come out from these forces:

• Longs: If the demand (bulls) is stronger than the supply for a prolonged period, an uptrend is likely happening in front of traders' eyes.
• Shorts: If the supply (bears) is stronger than the demand for a prolonged period, a downtrend is likely happening in front of traders' eyes.

The Role Of Technical Analysis: Spotting Trends, Breakouts and Bounces

Generally, shorter-term futures traders claim to be price action traders like scalpers. Day traders also argue that reading charts on a price-action basis works better for them.

However, mid-term traders are more inclined to use technical indicators since they approach weekly movements. These operators also use charting tools like trendlines and ky patterns. In the case of indicators, we can point out some, such as the following:

• RSI for divergences.
• Stochastic for overbought/oversold zones.
• MACD for trend crossovers.
• Bollinger Bands for handling volatility.
• Simple and exponential moving averages.
• Volume indicators.

So, how do these tools and concepts exactly help traders? They all belong to the technical analysis spectrum, and their combination encourages traders to develop advanced strategies for surviving futures markets.

For example:

• Volume can enhance breakout signals.
• RSI Divergence can unhide patterns like double tops/bottoms.
• MACD can detect trends and forthcoming crossovers/divergence, revealing also mean reversion points.
• Stochastic and Bollinger Bands can handle overbought and oversold levels caused by seasonal volatility.

Advanced Futures Strategies

Up to this point, by understanding the long and short sides along with the role of technical analysis, we can now discuss advanced strategies for futures markets and how they work.

Mean Reversion

The basis of this technique is to wait for a meaningful turning point so the market may return to its average price. Traders can detect those points by employing techniques such as follows:

• MACD crossovers around support/resistance zones can enhance a signal for a trend reversal.
• An RSI divergence is typical before a mean reversion, but traders should consider a divergence not always precede a trend reversal but a pullback.

End-of-day Strategy

The end-of-day session can present two scenarios:

1. Low volume, which naturally leads to range trading.
2. Afternoon news can cause a price breakout of that range. Traders can measure that breakout and seize an opportunity.

Swing Strategy

Swing traders would need a more significant move to detect more reliable signals, which essentially means they pursue a trend.

These trends in higher timeframes present momentum phases, and to seize them, traders can implement charting techniques, such as follows:

• To detect chart patterns like triangles, pennants, etc.
• Measuring those momentums with trendlines breakouts and consequently waiting for a pullback to the breakout point and confirming it with volume.
• To use indicators like MACD or ADX to keep track of the trend strength.

Intraday Strategy

In this case, the significant price movement that settles the basis for a trend day occurs at specific hours, at the start of a session across Europe, Asia, and North America.

By using Al Brooks's concepts, traders can seize this first move by detecting scalping and intraday swings in the following ways:

• Volume spikes push the price towards a weak zone where the longs and shorts battle.
• By detecting a candlestick pattern, traders can scalp a breakout or a trend in a lower time frame.
• Later, a reversal opportunity can take place for a reversal intraday swing movement.

Conclusion

Crypto futures are perpetual contracts that allow traders to take advantage of several price moves in the market. Advanced strategies require the combination of various techniques with a focus on how longs and shorts influence price changes.

In Altrady, beginners and professionals trade and monitor their futures market contracts across several crypto exchanges. Sign up for a free trial account today.