Bitcoin Futures Strategies – Backtest and Example
A Bitcoin futures trading strategy refers to the methodologies and techniques you can use to trade Bitcoin futures contracts profitably. Bitcoin futures are futures contracts whose underlying asset is a specified quantity of Bitcoin. The contract trades on the CME Globex platform, and it is financially settled. A Bitcoin futures strategy would include technical and fundamental analyses of the Bitcoin futures market, allowing you to take positions on the direction of Bitcoin prices, either for speculation, portfolio diversification, or hedging purposes.
Want to know about Bitcoin futures trading strategies? Launched on December 18, 2017, Bitcoin futures has become a popular futures contract on the CME platform such that the exchange also created the micro futures contract. Bitcoin is a decentralized digital currency for peer-to-peer transactions. It is the most actively traded and the first cryptocurrency, debuting in 2009. It can be traded via the spot market on many crypto exchanges, but the real standardized Bitcoin futures trade on regulated commodity exchanges like the CME platform.
In this post, we answer some questions about the Bitcoin futures strategy, and we provide you with a backtest of a strategy.
What are Bitcoin futures?
Bitcoin futures are futures contracts whose underlying asset is a specified quantity of Bitcoin — the most popular cryptocurrency. A futures contract represents a legally binding agreement to receive or deliver the specified quantity of the asset on a future date, at a pre-agreed price. The contract trades primarily on the CME Globex platform and it is financially settled.
Apart from the Bitcoin futures that trade on the CME platform, there are also Bitcoin futures that trade on cryptocurrency exchanges. However, given how poorly regulated those crypto exchanges are, trading Bitcoin futures with them is extremely risky, which is why we will focus on CME’s Bitcoin futures.
Of all cryptocurrencies available, only Bitcoin futures contracts are offered on the CME platform. While you can trade the other crypto futures on crypto exchanges, it is only Bitcoin futures that you can trade on the CME platform. Bitcoin contracts on the CME platform are standardized in terms of quantity and date of expiry. You can use it for portfolio diversification, risk hedging, and speculation.
What is a Bitcoin futures trading strategy?
A Bitcoin futures trading strategy refers to the methodologies and techniques you can use to trade the Bitcoin contract profitably. It includes the technical and fundamental analyses for timing the Bitcoin futures market, as well as the techniques for position sizing, risk management, and so on.
Here you can find a Bitcoin Futures trading strategy.
To succeed in trading the Bitcoin futures market, you will need a robust trading strategy that offers precise entry and exit signals. Your trading strategy may also include spread trading and arbitrage across exchanges.