Bitcoin Futures Trading for Beginners: How to Survive the Dangerous Futures Market
7 min read · · Korean original
If you haven't started futures trading yet, I recommend you never do. It's a highly addictive product, and there's a 99% chance that beginners will lose money. Don't do it. There's a reason Sang-woo from Squid Game ended up the way he did. The legendary investor Jesse Livermore also rode a winning streak in futures trading, then lost a fortune and ultimately made a tragic choice. Don't do it.
If, despite all this, futures trading looks like the only answer left in your life, and you feel you simply have to try it, please make sure to read this post carefully, again and again.
Introduction
In crypto markets like Bitcoin, you can make large profits using high leverage, but you can also suffer significant losses and lose all the money you invest in an instant.
In this post, we'll look at how to survive in this highly volatile futures market.
Key Takeaways
- Always make a trading plan before you trade. A trading plan lets you manage risk, spot good trading opportunities, and identify your own weaknesses so you can become a better trader.
- Learn how to cut your losses. If you don't know how to manage risk with a stop loss, never start trading.
- Only invest money you can afford to lose entirely. Overreaching will ruin you. Don't make emotional decisions; think rationally.
- Don't forget: more than 99% of people who trade futures end up losing money. Don't assume too easily that you can be in that 1%. The 1% are the world's top traders and big players armed with supercomputers, data, and enormous capital.
Bitcoin Futures Trading and How to Manage Risk
1. Make a Trading Plan
If you're serious about trading, the very first thing you need is a trading plan. To make money, you have to be strategic. Think about it. On the other side of your trade right now are Wall Street traders. They participate in the market with strategies built on massive collective intelligence, data, and supercomputers. And you? You might be wearing a ratty old T-shirt, with a YouTube video playing and a Binance trading window open. That's the reality.
So what are you going to do? Are you about to hit a long or short button? That's why you can't make money. That's why even if you do make money, you quickly lose it. It was luck, not skill based on strategy.
You need a plan. And by plan, I mean a plan to manage risk. Remember: if you don't lose, you're bound to win. The first key to surviving futures trading is learning how to manage risk, in other words, your losses.
Plan when and where you'll enter and exit a trade, what your position size is, and what leverage ratio fits your risk-reward ratio. These concepts are probably very unfamiliar to you, and rather than calculating them, you'll want to crank up full leverage and hit the button right away. Flip the bird to the commands your dopamine-craving brain is giving you, and prepare calmly. Hitting the button first is an unbelievably foolish habit, and above all, it's a foolish act that ends with you simply handing over your money.
Plan how you'll make money with futures trading. Learning and practice are essential for this. Read the various trading articles on my blog or places like Binance Academy, over and over again.
2. Learn How to Use Stop Loss Orders
I told you earlier to make a trading plan. If you're not sure what kind of plan to make or where to begin, start by learning how to use stop loss orders.
A stop loss is an order that cuts your losses automatically. Humans tend toward loss aversion, so we really hate realizing a loss when one occurs. But did you know that 99% of traders who go bust do so precisely because they don't limit their losses with stop loss orders?
Limit your losses. Always. Don't blindly trust your own judgment. Watch how the market moves, and if the price moves against the position you entered, lock in the loss. It probably won't be easy. But that's the only way to survive in the futures market.
Don't decide emotionally; think rationally. Cutting it off now is what keeps open your chance to earn bigger profits. Once you've lost all your money, you can't make any trades at all.
3. Always Keep Your Stop Loss Under 5% of Your Capital
What matters when cutting losses is never losing more than 5% of your total capital on a single trade. This is a conclusion many traders have reached through backtesting. Never lose more than 5% at most. Beyond that, recovering becomes far too difficult.
The crypto derivatives market in particular offers high leverage, so you can lose all your money in just a few minutes. 5% is a really generous figure, and if you want to survive in the long run, keep your risk under 3%.
If your capital is $10,000, the loss from a single trade should be between $300 and $500.
I'll say it again: the key to long-term survival is risk management. You can only survive by applying the right position size, use of leverage, and stop loss placement.
4. Don't Trade Too Often
Futures trading is highly addictive. Speculating on future prices releases an enormous amount of dopamine, so sometimes you may end up trading frequently and mindlessly just to get that thrill.
This is a common mistake among beginner traders. It feels like you have to keep trading, like you need to open a position right now, doesn't it? Hold back, hold back, wait, and wait some more. Enter a position only when the good setup you were looking for appears, and when your plan, covering basics like entry, take profit, and stop loss, is thoroughly prepared.
Don't forget: you may be sitting in your room, but on the other side are Wall Street traders.
5. Only Trade with Small Amounts
Always trade futures with small amounts only. Having KRW 100 million doesn't mean you can make KRW 1 billion. If it did, rich people trading futures would make more money than retail investors. That's absolutely not the case. Listen to the stories of wealthy people who lost billions of won in futures trading. They invested too much, and their losses grew far too large as well.
99% of beginners will lose money. Start with a truly small amount, experience the market, and build your skills. It will take at least a year, or even several years.
A "KRW 1 million to KRW 10 million challenge" is also a good approach. Try turning KRW 1 million into KRW 10 million. Did you hit KRW 10 million? Withdraw KRW 9 million and try turning KRW 1 million into KRW 10 million again. If you can pull this off three times, you can say you now know how to manage risk and where to enter positions. Even then, don't increase your capital. Your return is already 3,000%.
Trading is a long, hard fight. Don't try to make money fast. Not only can you not do it, you're bound to lose in the end.
Start small. If you make a profit, take your principal out first. Above all, never start with borrowed money. The pressure of having to pay back a debt changes your entire mindset. Investing with debt means choosing a hand that's already losing before you play. Only invest with spare money.
Conclusion
Bitcoin futures trading is a dangerous derivative product that, combined with high volatility and high leverage, can lead to significant profits or losses. You should never take part without an accurate understanding of trading strategies and the product itself.
Before moving to futures trading, spend plenty of time in spot trading. If you've moved to futures, practice how the market works and trading strategies centered on risk management. Above all, practice not being greedy and keeping emotions out as much as possible.
If you don't feel ready, never start. Futures trading is the fastest road to ruin. Imagining the best outcome is fun, but think realistically about the worst outcome too. You might end up driving a Lamborghini, but you might also end up unable to afford the subway.
Here are a few articles that may help. Take the time to read them slowly, again and again.
