How to Trade Crypto Futures on VALR
Digital asset derivatives like crypto futures accounted for the majority of the crypto trading volume in April 2024 and have been a major part of the market for a number of years now.
Unlike spot trading, where assets are bought or sold immediately at current prices, futures trading involves contracts to buy or sell assets at preset prices on future dates. Spot trades settle instantly, while futures contracts are fulfilled later, allowing for speculation and hedging without immediate asset transfer.
Wondering how crypto futures could fit into your investment approach? Our step-by-step guide will equip you with the knowledge and confidence to make your first trade – and beyond.
Crypto Futures 101: A Short Recap
Futures contracts are a type of derivative, where the value depends on a single or multiple underlying assets. In the case of crypto derivatives, this underlying instrument is a digital asset like Bitcoin (BTC) or Ethereum (ETH).
Futures contracts originate from the traditional finance (TradFi) space, with their standard forms representing contracts to purchase or sell an underlying asset at a set price at a future date (the expiration date). Regarding the latter, perpetual futures do not expire. Thus, traders can leverage crypto perpetuals to speculate on cryptocurrencies while holding them virtually indefinitely.
Perpetuals are the most popular type of futures in the crypto market. They have an additional mechanism called the funding rate to ensure futures prices track the underlying asset's spot price as closely as possible.
Buyers (longs) pay sellers (shorts) the funding amount in case the funding rate is positive, and futures prices are higher than the spot price. On the other hand, the funding rate turns negative if the futures price is lower than the spot price, forcing shorts to pay funding to longs.
In contrast to the spot market, crypto futures offer traders a range of benefits. As a result, they can amplify their potential profits or losses, short coins, hedge against market risks, gain exposure to cryptocurrencies without purchasing the underlying asset, and take advantage of cost-efficient fees and a highly liquid market.
However, futures are high-risk financial instruments with both the potential for increased profits as well as total loss of collateral through liquidation.
You can learn more about crypto futures by reading this explainer on the VALR blog.
4 Steps to Trade Crypto Futures on VALR
Now that you know what crypto futures are, let's see how you can trade them on a crypto trading platform like VALR.
Step 1: Choose the Right Platform
To get started with crypto futures trading, you must first select a platform to buy and sell them. In most cases, this service should be a cryptocurrency exchange. Here are a few criteria for choosing the right platform for futures trading:
Reputation: The platform should be operated by a legitimate service provider with an impeccable reputation.
Fees: You should also consider trading fees, focusing on those charged for deposits, withdrawals, and crypto futures trading.
Availability: You must always ensure that the platform is available in the country of your residence.
Selection of trading pairs: It's also important to assess the exchange's selection of futures trading pairs.
Security: The platform of your choice should feature a very high level of security, following industry best practices and safeguarding users' funds with measures like two-factor authentication (2-FA) and cold wallet storage.
Regulation: If your country has a licensing framework for crypto asset service providers, you should select a regulated exchange that complies with local laws.
With 6 years of market history, VALR is a pioneering crypto exchange based in Johannesburg, South Africa. As one of the first exchanges to receive Category I and II licenses from the Financial Sector Conduct Authority (FSCA) as a regulated crypto asset service provider (CASP), VALR also has approval to offer its services in Europe and has initial approval from Dubai’s VARA.
At the same time, VALR safeguards customers' funds via strict internal controls, 2-FA, and other advanced security features. It also has a 100% fully reserved platform, where assets are stored in a combination of hot and cold wallets.
VALR is available in most countries (with only a few exceptions), has an excellent reputation, and offers traders a wide selection of 17 different futures pairs (in addition to the 10 margin and 90+ spot market pairs including Simple Buy/ Sell pairs).
In addition, you can take advantage of the following benefits as a futures trader on VALR:
Enjoy up to 10x leverage on key markets to amplify your potential profits
Enter and exit positions seamlessly on VALR's deeply liquid markets
Trade with web, app, or application programming interface (API) with 24/7 availability to crypto futures and spot markets and access to high rate limits for high-frequency trading
Step 2: Set up Your Futures Trading Account on VALR
If VALR is your exchange of choice, the first step is to head to the official VALR website (or download the app via iOS or Android) and click on the "Get Started" button to create a new account. If you already have one, click "Sign in."
Upon creating your account, you should pass Know Your Customer (KYC) checks before you can start trading. But don't worry; it's a quick process that takes a few minutes in most cases.
In addition to KYC, you should also enable futures trading on your account. You can do that by choosing "Futures" from the "Pro Trading" menu from the top menu, selecting a futures pair, and clicking "Enable Futures" in the top right corner of the trading page.
On the next page, you will have to verify your address, create and select a subaccount for futures trading, as well as accept VALR's risk disclosures. Before you get started with trading, we also recommend reading our futures trading guide to know and manage your risks.
Step 3: Deposit Funds to Your VALR Account
After you have set up your VALR account with passed KYC and futures trading enabled, it is time to fund it with fiat. If you live in South Africa, you can deposit ZAR via the following options:
Bank transfer: After clicking "Deposit funds" on the dashboard, select Rand and "Via EFT." Then, choose your bank and initiate a bank transfer via your financial institution using VALR's details displayed on the page. Please utilise your unique VR reference number as the beneficiary to ensure that your transaction is deposited into your account.
Credit/debit card: In the "Deposit funds" menu, select the "Via Card" option, which will allow you to deposit ZAR to your VALR account via a South African-issued credit or debit card. After providing your card details on the next page, verify the transaction via 3D Secure. Please be aware that VALR only accepts 3D Secure-enabled cards with a 24-hour rolling limit of 10,000 ZAR.
Step 4: Place Your First Futures Trade
After depositing funds to your VALR account, select your preferred futures trading pairs from the "Pro Trading" menu on the top.
On the trading page, you will see the chart on the left, your orders and positions on the bottom, the order book in the middle, and the order form on the right.
After analysing the chart and determining an entry point for your trade, you can place your order using the order form.
First, select whether to buy or sell crypto futures contracts and the type of the order:
Market: VALR's matching engine will immediately fill a market order at the best available market price.
Limit: With a limit order, you can set your own price for your order. Your limit order will execute when the market price reaches the level you have set for the trade.
Next, set the trade amount and your desired leverage, and click the "Place Order" button at the bottom of the form to initiate the order.
Understanding Leverage and Margin
As mentioned earlier, crypto futures trading is a high-risk activity due to the ability to trade financial derivatives with leverage. When you trade digital assets with leverage, you borrow funds from the exchange based on the size of your initial deposit and the level of leverage.
After setting up the trade, the platform will utilise your initial deposit as the collateral, liquidating your assets in case your position's value falls below a certain threshold.
With no leverage, you will only lose your initial deposit when the value of your position falls to close to zero (e.g., you purchase BTC at $60,000, and its price crashes down to $0). However, when you trade on a margin, liquidation will occur once your losses on a position come close to or equal to the value of your initial deposit.
On the one hand, higher leverage has the potential to amplify your profits on your trades. For risk management purposes VALR traders can set stop loss and take profit orders.
Get Started With Crypto Futures Trading on VALR
Crypto futures trading enables you to amplify your potential gains, hedge against market risks, and take advantage of additional benefits. However, you should also be aware of the risks involved, especially when you use high leverage for your trades.
Ready to start trading crypto futures? Head to VALR to get started!
Frequently Asked Questions
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Yes, you can trade crypto futures in South Africa. VALR, a pioneering crypto exchange based in Johannesburg, offers crypto futures trading and has received licenses from the Financial Sector Conduct Authority (FSCA) as a regulated crypto asset service provider.
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You can hold perpetual futures contracts virtually indefinitely, as they do not have an expiration date. This allows traders to speculate on cryptocurrencies while holding the contracts for as long as they choose.
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Profit in crypto futures trading is calculated by the difference between the entry price and the exit price of the futures contract, multiplied by the contract size and the leverage used, minus any trading fees and funding costs incurred during the holding period.
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The amount needed to trade crypto futures varies based on the platform's requirements for deposits, initial margin and leverage. On VALR, you can begin trading with an initial deposit of at least USD 10 via wire transfer. For futures trading, the minimum amount depends on the specific cryptocurrency. For example, to buy Bitcoin perpetual futures with 10x leverage, you need a base amount of 0.0001 BTC.
See more post(s) on crypto futures
Risk Disclosure
Trading or investing in crypto assets is risky and may result in the loss of capital as the value may fluctuate.
VALR (Pty) Ltd is a licensed financial services provider (FSP #53308).
Futures trading is provided by VALR DAM Pty Ltd as a Juristic Representative of CAEP Asset Managers Pty Ltd (FSP number: 33933) an authorised financial services provider.
Disclaimer: Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.
