Since the introduction of futures on Bitcoin and other cryptocurrencies, futures spread trading became hugely popular among day traders and speculators. You can achieve great results with this, seemingly simple, strategy and make it fully automatic if you use reliable automation service providers like WunderTrading.
What is spread trading in futures?
This approach to trading was created more than three decades ago. It is a trading system that relies on price discrepancies that may appear between futures due to market fluctuations. These strategies are quite reliable if you understand the market and can make good predictions about the direction of the price of any given asset.
Futures spread trading strategies can be generally divided into three categories:
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Inter-commodity (inter-asset). This is a method when you use two types of assets that are different but have an intrinsic relation. Wheat and corn are two commonly used examples. Corn tends to drop when wheat increases in price and vice versa. Buying the former and selling the latter during the same month yields a difference in profit.
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Intra-commodity (intra-asset or calendar). This approach uses only one asset, but two futures with different expiration dates. You may buy futures for March and sell for April if you think an asset will go up in price and the market will correct itself by April.
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Bitcoin futures spread trading. Cryptocurrencies are a little bit different and usually require traders to predict volatility. You buy futures one month out and sell two months out or vice versa. It is highly important to make correct assessments of the market!
Using futures spread trading software
Contemporary automation products are executed in the cloud by the vendor. You don’t need to install any applications and can do everything in a browser. This approach allows you to use immense computational power without investing in hardware.
WunderTrading is a great example of a company that offers a wide range of different automation products at a low price. Here, you can automate any futures strategy and use TradingView’s incredible analytical tools to create rules and instructions for your bots.
Below is a step-by-step instruction on how to start spread trading futures:
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Go to the WunderTrading site and make a fresh account if you don’t have one.
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Connect an existing CEX account to the WunderTrading platform.
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Go to “My Bots” and create a new bot.
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Go to TradingView and create a strategy using technical indicators that you like.
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Add the necessary instructions to your new bot as shown in the tutorial on the WunderTrading website.
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Launch the bot and allow it to work for several months using your strategy.
Note that the profitability and success rate of this bot will depend on the quality of your strategy. If you make wrong predictions about the price direction, you will suffer the consequences. However, a bot will make sure that you never miss out on an opportunity.
When you are waiting for a bull spread on futures, you need to pinpoint the moment when the price starts creating a new trend. You may not be at your laptop or even sleeping when it starts happening. The bot will react quickly, and you won’t miss the right moment!
Should you try spread trading futures?
This strategy is considered advanced despite many social media influencers claiming that it is the easiest one out there. The reality is that you must make good predictions and make correct guesses about the price. While the idea of buying and selling simultaneously partially protects a retail investor from risks, the spread is usually quite small and requires you to use leverage which nullifies the protection from using the strategy in the first place.
On the other hand, futures spread trading is a good instrument that can be used to diversify your portfolio of short-term market positions with relatively low-risk orders that help to offset high-risk positions that you may want to hold to make more money.
We suggest learning more about how perpetual futures work and whether you will benefit from automating strategies relying on Bitcoin futures spread techniques.
