Futures contracts allow you to speculate on the future price of an asset without owning it. In crypto, perpetual futures are the most common type.
What Are Futures?
A futures contract is an agreement to buy or sell an asset at a predetermined price on a future date.
| Feature | Spot Trading | Futures Trading |
|---|---|---|
| Ownership | You own the asset | You own a contract |
| Leverage | 1x | Up to 125x |
| Expiry | None | Perpetual or dated |
| Funding | None | Funding rate payments |
| Liquidation | No | Yes (if price moves against you) |
Contract Types
Perpetual Futures
- No expiry date
- Use funding rates to keep price close to spot
- Most common in crypto
Dated Futures
- Expire on a specific date
- Trade at premium/discount to spot
- Example: Quarterly Bitcoin futures
Leverage Explained
Leverage multiplies your exposure:
| Leverage | Margin Required | BTC Moved |
|---|---|---|
| 1x | 100% | $1,000 per $1,000 |
| 10x | 10% | $10,000 per $1,000 |
| 25x | 4% | $25,000 per $1,000 |
| 50x | 2% | $50,000 per $1,000 |
| 100x | 1% | $100,000 per $1,000 |
Higher leverage = higher risk of liquidation.
Long vs Short
| Position | Bet | Profit When |
|---|---|---|
| Long | Price goes up | Price increases |
| Short | Price goes down | Price decreases |
You can profit from falling markets by going short.
Margin
| Type | Description |
|---|---|
| Isolated margin | Risk limited to position margin |
| Cross margin | Uses entire account balance as margin |
Isolated is safer for beginners. A bad trade only loses the margin allocated to that position.
Liquidation
Liquidation happens when your position loses enough that the exchange closes it automatically.
| Leverage | Price Move to Liquidate |
|---|---|
| 10x | ~9% against you |
| 25x | ~3.6% against you |
| 50x | ~1.8% against you |
| 100x | ~0.9% against you |
At 100x leverage, a 1% price move wipes out your entire position.
Funding Rates
Perpetual futures use funding rates to track the spot price:
| Funding Rate | Meaning |
|---|---|
| Positive (>0) | Longs pay shorts (bullish market) |
| Negative (<0) | Shorts pay longs (bearish market) |
High positive funding rates mean longs are crowded — a potential sign of reversal.
Fees
Futures trading fees are typically:
| Fee Type | Amount |
|---|---|
| Maker fee | 0.01-0.02% |
| Taker fee | 0.04-0.06% |
| Funding rate | Variable (every 8 hours) |
Trading Tips
| Tip | Reason |
|---|---|
| Start with 2-3x leverage | Most people lose with high leverage |
| Use isolated margin | Limits damage from one trade |
| Set stop-loss | Futures can liquidate your whole position |
| Don’t over-leverage | 3x with proper risk > 50x with no risk |
| Watch funding rates | High funding = crowded trade |
Who Should Trade Futures?
| Suitable For | Not Suitable For |
|---|---|
| Experienced traders | Beginners |
| Those with risk capital | Money you can’t afford to lose |
| Hedging | Gambling addiction |
| Short-term strategies | Long-term investing |
Bottom Line
Futures trading amplifies both gains and losses. Most retail traders lose money with high leverage. If you trade futures, use 2-3x leverage, isolated margin, and always set a stop-loss. A 100x trade is not investing — it’s gambling.