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Definitive Guide to Trading Bitcoin Futures

December 13, 2017 in

The time has come, Bitcoin has finally been introduced by two different futures exchanges. Bitcoin futures will provide traders the ability to short Bitcoin which could provide a real test for it and potentially fuel more rallies. No matter your directional opinion of bitcoin’s price, futures will no doubt allow more ways to express a trading opinion.

What Traders Need To Know

1 – Expect lots of volatility. This is a double edged sword, so exercise extreme caution. What makes bitcoin futures even more risky is they are based on an asset that is new and unproven. Bitcoin is very new and still being figured out by many financial participants and businesses alike. Outside of the dark web, it has not been a staple of commerce with a rich history to look at, so be extremely careful! Speculation will be rampant.

2 – Pay attention to volume and liquidity. Our hope is liquidity will improve as Bitcoin future mature and draw in more participants. As opposed to the cash market, Bitcoin futures will provide the ability to track volume instantaneously using Footprint charts which help track volume and order flow. This will provide new key data points for astute traders to use.

3 – Bitcoin Futures trade on 2 different futures exchanges as of this writing. CBOE Futures Exchange and CME Globex. The 2 exchanges base their futures contracts on different underlying sources. CBOE uses Gemini’s auction price for bitcoin, denominated in U.S. dollars while the CME created a CF Bitcoin Reference Rate and CF Bitcoin Real Time Index that it bases its Bitcoin futures upon. The CME uses several Bitcoin exchanges and trading platforms to provide pricing data for its index, including Bitstamp, GDAX, itBit, and Kraken.

4 – Here’s an FAQ about the CME CF Bitcoin Real Time Index. Here’s an FAQ about CME Bitcoin Futures.

5 – We expect the CME Bitcoin futures to have more volume and liquidity simple because more traders already have the CME data enablement. This will make it easy for existing traders to “tune in” to this market without adding additional exchange fees. However, one benefit the CBOE Bitcoin futures contract have is they are 1/5 the size of the CME contract.

Bitcoin Futures Contract Specifications

CME on Globex

  • Symbol in MarketDelta: BTC
  • Contract Size: 5 Bitcoin.
  • Tick Size: 5
  • Tick Value: $25

Example: So if long 1 Bitcoin future contract, a move from 18,250 to 18,300 would be 10 ticks, or $250.

CBOE Futures Exchange

  • Symbol in MarketDelta: XBT
  • Contract size is 1 Bitcoin.
  • Tick Size: 10
  • Tick Value: $10

Example: So if long 1 Bitcoin future contract, a move from 18,250 to 18,300 would be 5 ticks, or $50.

Bitcoin Cash Market

No matter the market you trade, we advocate monitoring the underlying cash market when trading futures when possible. We recommend having the cash market data coming into MarketDelta Desktop because it can be on screen right next to the futures. This allows any custom study to be implemented on either the cash or futures market symbol. To do this with Bitcoin you will need to have the CME Bitcoin Exchange enabled for MarketDelta.

Use the symbol BRTI to view the Bitcoin Real Time Index which is available on the CME Bitcoin Exchange. The BRTI is derived from several bitcoin exchanges and trading platforms and offers a fantastic view of real time Bitcoin cash (spot) prices.

We recommend using the BRTI instead of a single cash market Bitcoin price because the BRTI will smooth out some of the extreme prices readings you might see from a single exchange or platform. That’s because the BRTI is derived from several platforms/exchanges and offers more of an “average” price.

Another way to monitor and trade the spot (cash) Bitcoin market is to use a variety of the cash trading platforms like Coinbase, Kraken, GDax, Gemini, and many others. They would all provide a real time Bitcoin price but it would only be for their single platform or exchange, which is why the BRTI is a superior benchmark.

How Do I Get Started Trading Bitcoin Futures

If you are new to trading, especially futures trading, we highly recommend exercising extreme caution trading Bitcoin futures. It is very important to become familiar with any market you want to trade, especially new ones like Bitcoin. When you are ready to trade Bitcoin futures here are the steps to take.

  1. Open a futures trading account at one of our supported brokers.  To trade bitcoin futures on a MarketDelta platform your broker MUST support CQG as an order routing system. TD Ameritrade, Interactive Brokers, ETrade, and Tradestation do not support CQG so you can’t use these as a broker for MarketDelta.
  2. Subscribe to either MarketDelta Desktop or MarketDelta Cloud. Both platforms support Bitcoin futures.
  3. MarketDelta Desktop ONLY: Subscribe to MarketDelta Desktop. Choose CME Bundle as the exchange for Bitcoin or CME Professional if you don’t have a live trading account setup with a supported broker.
  4. MarketDelta Cloud ONLY: If using MarketDelta Cloud, just contact your broker and ask them to enable your live trading account login for “MarketDeltaCloud“.
  5. The CME Bitcoin future symbol is BTC. That’s what you will put into the platform to trade or create a Bitcoin futures chart.
  6. Questions? Call us at 1.312.922.7800 or +44.20.7193.6817.

Live Bitcoin Trading Room

Each day (Mon – Fri) in the MarketDelta Trading Room we reference Bitcoin trading along with other futures markets. If you are new to trading or a seasoned veteran, you will gain insight from our traders’ perspective and learn some unique trading strategies not taught anywhere else.

In the live trading room we will show the following:

  • Strategies for trading Bitcoin futures.
  • Help you understand some of the important differences between Bitcoin futures versus other popular futures contacts.
  • Analyze volume and order flow for Bitcoin futures.
  • Teach how to reference the Bitcoin cash (spot) market and use it to trade Bitcoin futures.

Trading Bitcoin Futures

Being MarketDelta, we believe it is vital to see the volume and order flow when trading. Otherwise, it’s like watching price move without understanding what is driving price.  We believe this will provide bitcoin futures traders an enormous edge over bitcoin cash traders because they will see what is driving price.

Subscribe to the CME Bitcoin Indexes for $5/month so you can watch the underlying spot Bitcoin market alongside the Bitcoin futures. As with any market that is prone to momentum swings, it will be crucial to know how the underlying market is trading. It will provide a “checks and balances” for the futures price.

Always be aware that the market could swing much further than you expect because of momentum. Don’t get caught trying to add to losers because it could wipe you out.

Trade small, stay disciplined, and wait for your trade.

Bitcoin Education Resources

CME Group Into to Bitcoin Course Overview