Can You Make Money From Crypto Without Owning It?

A successful professional trader must arguably also be an elite risk manager. 

Perhaps contrary to popular belief, traders reportedly achieve success not by just making money but by then keeping the money they make. This is arguably a subtle but important distinction. One could operate a trading system that would yield outstanding results and still fail to make a cent because not enough consideration has been given to risk.

One of the ways traders seem to circumvent this pitfall is by outlining the types of trading risks in their trading plan. A prudent trader, for example, might carefully examine a maximum loss per trade and maximum loss per day before applying any trading system, and adhere to preset rules that ensure these risk parameters are nearly never broken.

One of the ways some traders overcome exposure risk — the risk accrued while a trading position is still open — is through the use of complex financial instruments like options and futures. This can be particularly important in the cryptocurrency scene, where fluctuations could radically alter a trader’s open profit and loss.

Through examples like Tradovate, a modern futures trading platform and broker, traders might more quickly yield results that could normally take extended periods of time. Because of the derivative nature of future contracts, they can also do this without ever owning the asset they’re trading. Of course, futures trading also introduces a set of other risks that must be carefully examined.

Nonetheless, Tradovate reports providing traders with a gateway to manage exposure risk while leveraging the volatility of the crypto scene.

Why Trade Futures?

Much like the cryptocurrency scene, futures trading operates on a 24-hour market cycle. This gives traders the most amount of time to find the right trading opportunities throughout the day and to learn how to ignore the noise.

Unlike stock and options trading, futures trading is not subject to the notorious pattern day trading rule (PDR) that limits a trader’s number of trades per day when their account value is less than $25,000. As a futures trader, all you need is enough cash to cover a futures contract to engage with the markets.

The accessibility of the futures market comes with potential financial benefits. With futures trading, for example, traders can buy approximately $100,000 worth of the S&P 500 stocks for less than a $5,000 margin.

An additional financial advantage can be found in tax law/rules. Future profits are taxed 60% as long-term capital gains instead of as income, making the tax burden a little less heavy on traders. 

Why Nano Bitcoin Futures?

Aside from potentially diminishing exposure risk and providing general benefits, Nano Bitcoin Futures (NBFs) also report other intrinsic benefits.

For one, NBFs are priced at 1/100th of a Bitcoin BTC/USD. Even at the height of Bitcoin’s boom, an NBF would’ve cost around $680, a price far more affordable than the actual cryptocurrency. Affordability breeds not only accessibility but also leverage. While leverage can provide more buying power, it also increases risk.

In addition to a reduced price, Tradovate says it has further improved the affordability of NBFs by cutting commission, market data, subscription and inactivity fees. NBFs are monthly contracts that are listed for the two nearest months.

Click here to learn more about optimizing crypto trading with NBFs.

Trading virtual currency derivatives have a variety of unique and potentially significant risks. Please read our full Virtual Currency Transaction Disclosures & Risk Disclosure Statement for Virtual Currency Futures prior to any virtual currency trading.

This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investing advice.

Featured photo by Markus Winkler on Unsplash