Trading Bitcoin (BTC) futures may seem easy in the first place, but there are a number of fees that investors seeking big returns from high leverage transactions are ignored. In addition to investment fees; Investors should also be aware of the variable funding rate, where additional fees on many exchanges should be considered.
So what are the three main points that every crypto investor should know about Bitcoin futures?
Knowing the Funding Rate
You may encounter a few hidden costs when trading on Bitcoin futures contracts. The most basic of these is the rate of funding collected for all futures. These instruments are also known as permanent exchanges, and such fees apply to every exchange. The funding rate may not apply to short-term leverage investors, as it is charged every 8 hours and rarely exceeds 0.20%.
For a longer term investor, it represents a figure of almost 20% this month and provides a significant drop in expected profit.
In the chart above, positive figures indicate that buyers will pay such a fee to sellers and vice versa when the funding rate is negative.
Fees are Added to Leveraged Amounts
Investors often ignore trade fees as they seem to be a fairly low figure of 0.075 percent, but it is important to note that these costs are pre-charged based on the leverage being processed.
An investor who deposits 0.01 BTC pays the same buyer fee for a transaction of $ 3,000 with another trader who deposits 1 BTC. This reduces a person’s profit margin and potential earnings. There are other fees for transactions that need to be entered in the stock market order book above or below market levels, such as trading orders. There are also installment fees that are accrued in orders facing immediate execution.
Exchanges will also drop an additional $ 2.25 from an investor’s margin to cover potential liquidation fees. Assuming that Bitcoin is at the level of $ 10,000, the initial deposit of 0.01 BTC of $ 100 requires a 4.7% gain even after the $ 3,000 trade considering buyer fees. It is possible to avoid such costs using constructive fees, that is, orders cannot be carried out at the market price.
Constructor Fees Also Affect Results
Placing a purchase order at $ 9,400 in the order book above will bring the order to the maker. On the other hand, sales from 9.460 USDT will be 0.075 percent in buyer fees.
Most futures exchanges offer a negative constructive fee, which seems to be a pretty good deal as traders pay for trading. This strategy may work for extraordinarily conscious and calm investors, but this illusion of free money will certainly be harmful to almost most.
It is very reasonable to avoid paying for investors whose time periods are longer than a week. Negative wages should be seen as an incentive to encourage sticking to their goals, stopping losses and taking profit orders, rather than using market orders. Positive results come from this strategy. For example, prices can avoid being watched all day and also help a trader to stick to their game plans.
Cross Margin is a Good Option
Although the default setting is diagonal margin, there are two ways to manage the margin. This setting uses the full amount deposited as collateral for each transaction and moves the balances to what is most needed. No matter how experienced this is, it is the best strategy for almost every investor. When an isolated margin is selected, the maximum allowable leverage for each contract can be manually set. This setting causes auto-stop losses to be triggered earlier and execution moved to an automated trading engine.