Those new to the world of investing may think that professional traders spend most of their time staring at screens day and night analyzing the markets and selecting the best trades, but this couldn’t be further from the truth be distant.
Having a good eye doesn’t distinguish the best traders from the average Using proven strategies that enable professional traders to remain net positive over long periods of time. Today we’re going to discuss how futures carry the trade, what the funding rate is, and how the best traders use trailing stops.
Any of these simple strategies don’t involve proprietary trading bots or a significant margin deposit, which means that An investor doesn’t need a massive trade balance to make a profit.
Crypto markets are known for their volatile price movements This means that many assets go up or down by two to three digits within 1 to 24 hours.
Investors are drawn to the opportunity to generate outstanding returnsHence, it may seem crazy to only propose a 2% monthly profit for cryptocurrencies.
Why should an investor embark on a “below average” strategy? The answer is compound interest. If a trader can get 2% per month, their annual profit is 27%.
Few traders could consistently achieve this performance by trying to guess the market highs and lows. So, More reliable profits relieve you of the stress of potential losses and the almost impossible task of timing the market.
A great strategy called “Carry Trade” consists of buying a cryptocurrency in traditional markets and selling its futures fixed monthly calendar.
This rate can be measured by analyzing the base indicator, a metric also known as the futures markets annualized premium.
This is not a permanent surgery since The base indicator fluctuates depending on how bullish investors are. Usually there is a bigger chance with altcoins as there is less competition for them.
Check out the graphic above to see how The base of the ethers (ETH) reached the annualized level of 20% in mid-August. There is a catch, however.
The devil is always in the details, and this is one of those cases. This trade only works if the cryptocurrency stored as a margin matches the one short-circuited by futures. Some futures exchanges only allow Bitcoin (BTC) or Tether (USDT) to be deposited as security.
One important thing for investors to remember is that unlike perpetual futures (reverse swaps) Fixed calendar futures contracts have a fixed expiration date. So, It is necessary to sell the position for cash at the time the futures contract is settled.
Negotiate the funding rate
Other non-directional deals include option strategies that often involve multiple expiration and futures contracts.
An example that is less risky is using and trading the funding rate. In the case of open-ended contracts (reverse swaps), a long-term or short-term price is calculated depending on the imbalance in the leverage effect. These exchanges report an estimate for the next funding window, typically every 8 hours.
When this price rises, professional traders shorten futures contracts while buying them on spot exchanges. This way, your risk is fully covered by collecting the funding rate and immediately reversing the operation.
Automated trading is synonymous with success
Sometimes there aren’t many risk averse trading strategies in the market. In such situations, even professional traders might consider taking directional risk. What sets them apart from beginners is the use of automated trading.
Most traders know how to use stop loss, which is good, but that doesn’t create a chance of winning.. The same tool can be used to initiate trades, especially when a “trailing stop” is used.
In the example above, this (long) buy with trailing stop has a trigger price of USD 12,900. So, As long as the market continues to trade above this level, this order will remain inactive.
Once Bitcoin has reached this level, it will only be bought after a jump of 0.8% (recall rate). Hence, it will automatically buy once Bitcoin climbs from its lows to $ 103.
This strategy is widely used by professional traders to automate their investment process. and significantly reduces the need to check prices 24 hours a day.
Practice and master these three strategies: futures lead the trade, take advantage of the financing rate, and use the trailing stops tool.. Focus on learning undirected options and trading strategies, and free yourself from guessing market tops and bottoms.
The views and opinions expressed here are solely those of darer and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement is associated with risks. You should do your own research when making a decision.