Understanding the basis of the Crypto currency and premium
As the cryptocurrency market continues to develop, the trafficking of the crypto currency can be highly risky, high reward. Among the various types of contracts available on these platforms are the future, which offer traders the potential for significant profits or losses if they are not executed properly.
In this article, we will break into the world of the future of the cryptocurrency and explore the concept of premium in the cryptocurrency markets. We will also talk about how to understand this critical aspect of cryptocurrency trading.
What is the Crypto Future Agreement?
The Futures Crypto Currency Agreement allows customers and sellers to agree on the price for a certain amount of the CRIPTO currency on a future date, known as a “strike” or “expiration”. The difference between the price of the offer (buy) and the price (sales) represents the premium, which may be or profit if it is executed correct or loss if not.
How does premium work?
Imagine buying 100 units of Bitcoin in the amount of $ 10,000 with a futures contract that expires in six months. The price of the offer is set by exchange, and is currently $ 9,500 per unit. However, there are also sales orders at this price, which can be completed for $ 9,800 or more. In this scenario:
* PREMIUM OFFER:
Difference between offer ($ 9,500) and AST ($ 9,800) premium is of $ 300.
* Ask Premium: If you are willing to sell 100 units of $ 10,000 each, your sales order would be fulfilled for $ 9,900, resulting in the premium ask (sales) in the amount of $ 200.
Types of premium
There are two primary types of premium:
- Premium market order : This is a difference between an offer and ask for prices at a certain moment. This is basically the spread that created market forces.
- Premium Premium Premium : In this scenario, the prices of offers and search are coincided, resulting in a premium.
Factors that affect premium
Several factors may influence the premiums on the Crypto -Valute Agreements:
* Volatility
: Higher volatility leads to higher premiums due to increased trade activities.
* Trading Volume : A more active participants in the market increase premiums because they compete for better stores.
* ORDER FLOORS : Insulting in order flow between a purchase order and sales can create top differences.
How to avoid trading with premium
To alleviate risks, traders should be aware of the following strategies:
- Use the stop order order : Set the price to limit potential losses.
- Diversify your portfolio : spread the risk on multiple crypto currency and market type.
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Conclusion
Understanding the premiums in the cryptocurrency markets is crucial for making informed trading decisions. By understanding the basis of the future of the contract, you will be better equipped to move on these complex financial instruments. Remember to remain disciplined and adapt your strategies to develop market conditions.
As the cryptocurrency market continues to grow and mature, it is crucial to remain educated about the intricacy of the premium to maximize the potential gain, at the same time minimizing losses.