Bitcoin Futures Risk Management

Whenever you invest there will be some risk. We help you manage it when you trade Bitcoin Futures with Spread Co.

When you trade Bitcoin Futures you’re trading on margin. So you’re using leverage to gain exposure to a potentially higher profit. This approach also means that your potential loss could be many times greater than your initial outlay. We call this an investment risk.

To help you manage this risk, there are useful risk management features included in your Spread Co account.

Some of them are free to use so it’s worthwhile using them with your positions. Here’s how they work.

 

 

Managing Bitcoin Futures Trading Risk

Spread betting includes features which can help you to manage your risk. These can let you put a limit on your potential loss, and also to lock-in profits when they reach a particular level. The good news is that two of the main spread betting risk management features — stop loss and limit orders — come at no extra cost. So it’s easy to use them with all of your trades.

 
 

Managing the Amount at Risk

When you spread bet on Bitcoin Futures, you probably have an idea of how much you’re prepared to risk if the market doesn’t move in the direction you anticipate.

You can manage this using a stop loss, which lets you set a price at which your trade will automatically close. This would be lower than your buy price if you’re going long, and higher than your sell price if you go short.

But with a stop loss there’s no guarantee that your trade will be closed at that price, especially in volatile markets. If the market ‘gaps’, your order will be filled at the first available price.

 
 

Locking In Profits With A Limit Order

If you have the time to keep a close watch on Bitcoin Future prices, you might be comfortable closing your positions manually when you reach your desired profit level.

If you can’t do this, you might be better placing a limit order.

This means your trade will close automatically when your position reaches a particular price.

 
 

Using Stop Loss Orders With Bitcoin Futures Trading

A stop loss is an order. If the market price meets this order a trade is automatically executed. So, if the price moves in the opposite of the direction you predicted, a stop loss will give you some protection and limit your losses.

You can apply a stop loss to all positions with Spread Co.

 
 

Using Stop Loss and Limit Orders Together

Using these features together with your trades can help you manage the risks associated with Bitcoin Futures trading. 

You can adjust your stop loss and limit order values to take account of changing market conditions without having to close your trades.

 

Example Price Change

Let’s imagine that the Bitcoin Index Future (our benchmark index that tracks the price of Bitcoin futures) is trading 13250 (BID) and 13300 (OFFER)

Your Position

You think that the price will fall, so you take a short position. 

You decide to go short £1pp, with a Limit order at 12,500 and a stop loss at 14,000

Your Margin

£1 Per Point on a Bitcoin is equivalent to one tenth of a bitcoin

£1 x 13,250 / 10 = 1,325

1,325 x 20% = £265 Margin

Example Price Change

If the price moves from £12,750 to £12,850:

A £1 Stake would move on the price on the fourth Value 12,750

A 100 Point move would equate a £10 Profit or Loss

 

Possible Outcomes

   

Bitcoin Futures price falls to your Limit Order value £12,500

Bitcoin Futures price rises to the Stop Loss value of £14,000

Original bid price minus your limit order price multiplied by stake per point:

Original bid price minus your stop loss price multiplied by stake per point:

((13,250 - £12,500) x £1) / 10

((13,250 -14,000) x £1) / 10

Financing = £0 (Zero financing on Future Markets)

Financing = £0 (Zero financing on Future Markets)

Profit £75

Loss £75

    

 
 

 

Try Bitcoin Futures Spread Betting with No Risk

A Spread Co demo account lets you spread bet Bitcoin Futures in a simulated live market environment. There’s no cost involved and absolutely no risk.

 
 
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Spread Co Limited is a limited liability company registered in England and Wales with its registered office at 22 Bruton Street, London W1J 6QE. Company No. 05614477. Spread Co Limited is authorised and regulated by the Financial Conduct Authority. Register No. 446677.

Spread betting and CFD trading are leveraged products and can result in losses that exceed your deposits. Ensure you understand the risks.

Losses can exceed deposits. Click here to learn more.