Responsible trading in cryptocurrency markets is necessary, especially in futures markets, which always entails high risks. The cryptocurrency market is unpredictable and even professionals face losses from time to time. This is good. But the trader's task is to minimize these risks, as well as to accustom himself to discipline and responsibility, which are the main assistants in this exciting business.
In this article, cryptomais.com editors will consider several responsible trading rules on Binance that experts and exchange developers themselves recommend following.
This term generally refers to tools and methods for monitoring investments and transactions, as well as awareness of responsibility for one's actions. Any exchange, and Binance is no exception, always warns that it is not responsible for any losses, as it only provides an interface for buying and selling cryptocurrencies. The company does not provide investment recommendations; Everyone decides for themselves when and in what to invest.
Binance notes that trading is generally not an activity for everyone. Cryptocurrency trading may not be suitable for people who:
- They tend to use funds in trading that are critical to them in case of loss – for example, taken on credit or from family savings.
- They don't like to read or watch educational content, but try to figure everything out on their own. This is acceptable in other areas, but not in finance. You should first update yourself, negotiate demo account and only then start investing little by little.
- Get very upset or depressed when the market doesn't go in the expected direction.
- They gamble, are highly dependent on trading, and become stressed if family or friends ask them to moderate.
In these cases, it is better to choose another type of activity, rather than suffer and go bankrupt – there is probably something that works much better. Although trading may seem interesting and exciting, it is not a game but a business.
The three main aspects of responsible trading that Binance emphasizes are continuous education, self-discipline, and capital protection (risk management).
When to Stop: Fighting Binance Addiction
On Binance Futures When trading futures and options, it is possible to set an automatic pause after a certain time. This will allow you to relax and refresh yourself; this feature is necessary for players who have difficulty controlling themselves.
- Anti-addiction warning. A risk reminder that appears in the event of a major loss.
- Voluntary lockout. The feature is available on Binance Futures and the margin trading platform; you need to open the order settings menu and select the appropriate item. Then enable the deactivation of trading functions by specifying the desired lockout duration.
After activating the option, trading on USDⓈ-M and COIN-M futures, grid trading, options, battles via any version of the website: mobile app, web, desktop program, as well as API will no longer be available. The same applies to blocking margin trading.
We advise you to keep in mind the existence of such a function if you feel that you cannot, without external help, refrain from rash actions dictated by passion.
Price protection mechanism
Price protection is another futures market feature that allows you to effectively control risk. If enabled, the stop loss/take profit order will not be triggered when the trigger price is reached if the contract mark price differs from the last market price by more than a specified percentage. This allows you to protect the strategy you are following against sharp price fluctuations. Please note that price protection only works from the moment it is enabled in the settings and does not apply to trading via the API.
Price protection works on different order types and can be activated/deactivated at any time.
To activate it, open the order settings menu on Binance Futures and then the “Price Protection” tab. Please note that this trade must be performed separately for USDⓈ-M and COIN-M futures.
How the Insurance Fund Works on Binance
The insurance fund is a mechanism to protect traders from bankruptcies and unnecessary losses, that is, to minimize the liquidation of positions. The losses of users who go bankrupt are covered by commission fees from other traders.
The operating principle of the futures insurance fund:
- When a position is liquidated, that is, the collateral becomes less than the maintenance margin, and the trader does not have the resources to liquidate other positions, he goes bankrupt.
- In this case, the broker must assume the remaining positions.
- Binance will then activate the insurance fund, gradually adding funds to the market. To achieve this, clients are charged fees for liquidating positions that do not result in bankruptcy.
The Fund attempts to verify each position as cleanly as possible. Any positions that may exceed the predefined maximum will be liquidated. There are several rules regarding insurance funds – for example, USDT-M contracts for BTC, ETH and BNB have a common fund.
You can view the current status in the “Information” -> “Insurance Fund History” section on Binance Futures.
Self-deleveraging indicator
Finally, Binance operates an automatic deleveraging mechanism, or ADL, which is a last-resort measure required if a fund is unable to cover a bankrupt’s positions. The exchange tries to minimize the use of this tool in every possible way, but sometimes it is unavoidable.
For each trader there is an indicator that shows their risk of automatic deleveraging.
When taking this indicator into account, the profit and leverage value are taken into account; there is a special formula for calculation. Based on this, the positions of users with high leverage will be liquidated earlier than others.
In case of AML, all trader's positions are liquidated. You can open new ones immediately after that.
Frequently asked questions
Conclusion
On our website, as well as on the Binance blog, you can find a variety of information and tips to help you achieve responsible trading. Many people have heard that you can make money from cryptocurrency trading and start withdrawing money immediately, without any preparation, studying information or even planning your own budget. We encourage you to act wisely. The same goes for choosing a cryptocurrency to trade. No matter who gives you investment advice, do your own research before investing in an untested project.