Cryptocurrency futures are certainly more generally available than traditional futures. Crypto investors can trade significantly less amounts and are not required to be accredited.
And yet, even on cryptocurrency exchanges and trading platforms, commissions can be encountered.
Previously, we published a detailed guide «How to start trading Bitcoin futures?», Now we will take a closer look at what fees should be considered when trading cryptocurrency futures.
What are the commissions?
An integral part of crypto trading is the trading fees charged by exchanges to maintain their operations. Commissions are charged on every transaction as customers buy, sell, and even convert cryptocurrency or cryptocurrency-linked futures contracts.
Types of trading commissions you need to know
There are two main types of fees that clients can face on cryptocurrency derivatives exchanges such as Binance Futures. These are the maker’s commission and the taker’s commission.
A trader acts as a taker or a maker, depending on whether he provides liquidity and, therefore, increases the depth of the order book (maker) or withdraws this liquidity (taker). Maker and taker fees are also referred to as order flow fees.
When you add liquidity to the order book by placing a limit order below or above the market price, you pay a maker’s commission. Increasing the size of the order book is beneficial for both the exchange and market participants.
Thus, the maker’s fee is usually lower than the taker’s fee. Typically, makers trade at a high frequency, implementing strategies that generate profits by providing liquidity to other traders and obtaining a supply / demand spread.
Otherwise, when you take liquidity from the order book by placing market orders, you pay a taker fee. The taker’s fee is usually higher than the maker’s fee.
Market participants acting as takers may include hedge funds looking to profit from short-term price changes. Takers can also include large investment firms whose goal is to acquire a large volume of contracts for immediate execution.
How do trading fees affect your bottom line?
Commissions can affect your profit depending on how your entry and exit orders are executed. As we will see below, the maker’s commissions are lower and in some cases can bring profit to the investor.
Even a small transaction fee, combined with other ancillary costs such as funding fees, will accumulate over time; accumulated costs can significantly reduce the return on your portfolio. If your portfolio grows 20% in a year, but you paid 2% in commissions and other costs, your return is only 18%. Over time, this difference accumulates.
Binance Futures Fee Structure
Binance Futures, the largest cryptocurrency platform, offers the lowest taker fees of any other exchange. The table below shows that Binance taker commission rates start at 0.04% and can go as low as 0.017%. Maker commission rates start at 0.02% and can be as low as 0.0000%.
To trade on Binance with the lowest taker or maker commission rates, a user’s 30-day trading volume must be at least 750,000 BTC or at least 11,000 BNB. But to get started, you need a 30-day trading volume of 250 BTC or less. At the same time, you do not need to have a trading volume in BNB.
Compared to taker fees on other major competing exchanges, only Huobi offers an equally low initial taker fee of 0.04%. It is higher on all other exchanges. The initial maker commission rate on Binance is equal to the rate on OKEx, Kraken, Huobi and is 0.02%.
Calculating trading fees on Binance
Binance users can calculate their trading commissions using just a few values, such as the price to enter and exit a position, the number of contracts, and the commission rate.
Commissions are calculated using the following formula:
Opening commission = (number of contracts x entry price) x trading commission rate.
Closing Fee = (Number of Contracts x Exit Price) x Trading Fee Rate.
Let’s take an example: if you open a long position on 1 BTC / USDT contract for $ 40,000 and want to close the position at $ 40,500, with the taker commission rate set at 0.04% and the maker commission rate at the level of 0.02%, the amount of commissions would be as follows.
The above equations will help you better determine the entry and exit points of a trade to avoid higher commission rates. When entry and exit orders are executed as maker orders (as in the example), the lowest commission is charged per trade of 16.1 USDT. When both maker and taker orders are executed, the commission is always lower than the double taker order. Traders are required to pay 32.2 USDT if both the entry and exit orders are executed as taker orders.
The difference between all taker and all maker orders is 16.1 USDT. In other words, the execution of all-taker orders will be twice as expensive as the execution of all-maker orders. Thus, focusing on maker orders is key for traders seeking to minimize any commission costs.
How do I trade futures contracts on Binance?
You can trade futures contracts on the largest cryptocurrency exchange Binance. This is the safest option and with the lowest fees available on the market. To get started, you need to register on the official website of the exchange https://binance.com.
How to start trading crypto futures on the exchange:
- Open a futures trading account with Binance. Please note that you must enable 2FA to fund your futures account and trade on Binance Futures. You can find out more about opening an account here.
- Deposit funds in USDT, BUSD, or any other available cryptocurrency on Binance Futures. Binance Futures supports a wide range of crypto assets as collateral.
- Select the desired futures contract. There are two types of Bitcoin futures available on Binance: USDⓈ-M and COIN-M futures. So, if you want to trade BTCUSDT perpetual contracts, go for USDⓈ-M futures. For BTCUSD coin-margin contracts, choose COIN-M futures.
- Choose the appropriate leverage for your futures contract.
- Choose from one of the order types available on Binance Futures. Newbies can choose a limit order or a market order to buy their first futures contract.
By focusing on the transaction fees and liquidity in the marketplace, you will be able to conduct more successful trades that will provide you with the results you want. This will allow you to trade with optimal commissions and ultimately receive bonuses. Paying attention to commissions also avoids any surprises that newbies are especially likely to fall prey to.
If you’re ready to start trading, Binance Futures is a great place to start, offering the lowest fees of any cryptocurrency exchange. Binance is the most popular crypto exchange in the world as it has the largest turnover and number of users. The platform supports transfers in rubles from Visa / MasterCard bank cards and payment systems QIWI, Advcash, Payeer.