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CoinEx|Beginner’s Guide: What are the Risks of Futures Trading?

2022-03-22 06:57:52

Most investors trade futures because of their high leverage and handsome returns. However, at the same time, the high risks have kept away beginner investors who are not fully aware of the market conditions. Such risks refer to the fact that futures traders may lose their revenue or even principal. As such, beginners must examine the relevant risks and only start trading when the risks are acceptable.

Futures traders face the following risks:

1. Price fluctuations

The price of futures, a unique type of investment product, is influenced by multiple factors. It is subject to significant fluctuations. When trading futures, investors struggle to capture all the market trends and may therefore make mistakes. Hence, if the risks are not mitigated, they might suffer huge losses. It should also be noted that investors must bear all such losses on their own.

According to the price fluctuations shown in the below picture, the BTC price moved drastically from 10:00 to 11:00 on March 16, 2022. The price soared and plummeted within a very short period, which is almost impossible to predict.

 Market Information for futures trading on CoinEx

2. Forced liquidation

Investors should be reminded of the high leverage ratios in futures trading, which enables multiplied profits/losses. If the market price moved opposite to the direction you chose, then you might suffer large losses. Depending on the size of such losses, investors need to add more cryptos as margin or reduce their positions; otherwise, they may face forced liquidation and will have to bear all losses incurred.

When trading futures on CoinEx, investors can refer to the Liq. Price and Bankruptcy Risk provided on the website to keep track of the liquidation risk and adjust their positions in time. 

Futures trading on CoinEx

3. Trading risk

For instance, if you are trading within the futures trading system of a crypto exchange, the orders are irrevocable when they are executed. Therefore, investors should study the possible risks in futures trading beforehand. Meanwhile, exchanges do not make any promise on the returns of futures and will not share the revenue/risk with investors.

4. Policy risk

Traders of crypto futures in certain regions may also face regulatory risks. Before trading futures, investors should first study the relevant regulations of the region they are in and make prudent decisions as to whether to trade or not.

5. Force majeure factors

In futures trading, your orders might not get executed or fully executed due to factors beyond the control of exchanges, (e.g. force majeure factors such as earthquakes, floods, and fires or computer/communication system failures, etc.) and you will bear all losses arising therefrom.

6. Other risks

When trading futures at a high leverage ratio, investors may bring significant risks to themselves and the market. Normally, trading platforms have the measures in place to respond. For instance, CoinEx monitors positions with an excessive leverage ratio to maintain market stability and will take the corresponding measure when it believes that a position will significantly destabilize the market. This includes communication, risk notices, Auto-Deleveraging (ADL), forced liquidation, and order cancellation. Moreover, written explanations will also be provided. Such measures are intended to create a stable, secure trading environment and also protect other investors.


Now that we know all the risks in futures trading, it should be stressed that beginners must fully examine the relevant risks and reasonably invest their assets when trading futures.

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