Futures trading is a form of entering into contracts to buy or sell an asset in the future at a pre-established price. Such a contract is called a futures contract. It is used for speculation, hedging risks, and ensuring liquidity in financial markets. Futures are widespread in cryptocurrencies, stock markets, commodities, energy, and agricultural products.

1. The essence of a futures contract

A futures contract is an obligation between two parties:

The buyer agrees to purchase the asset in the future at a fixed price.

The seller agrees to deliver the asset at the same price.

Futures do not require the actual purchase of the asset. In most cases, settlements are made in cash, and the contract itself is closed early.

2. How futures trading works

Futures are traded on exchanges based on the principle of margin trading. The trader deposits collateral (margin) and gets the opportunity to open a position that exceeds their capital.

The process looks like this:

1. The trader selects an asset (for example, BTC/USDT).

2. Opens a long (buy), expecting growth, or short (sell), expecting a decline.

3. Sets leverage (1x, 5x, 10x, and above), increasing potential profit and risk.

4. The contract is re-evaluated in real-time.

5. The position is closed manually or forcibly upon reaching liquidation.

3. Long and Short

Long — a bet on the asset price rising.

As the price increases, the trader makes a profit.

Short — a bet on falling prices.

When the price falls, the trader profits.

This makes futures attractive in both bull and bear markets.

4. Leverage

Leverage allows trading with a volume exceeding one's own balance.

For example: with a capital of 100 USDT and leverage of 10x, the position size will be 1,000 USDT.

However, leverage increases not only profits but also the risk of liquidation.

5. Margin

The exchange locks part of the trader's funds as collateral for the position. Margin can be:

Cross-margin — the total balance works as a single collateral.

Isolated margin — each position has a separate margin, reducing the risk of total loss of the deposit.

6. Perpetual futures

In the cryptocurrency industry, perpetual futures are popular.

They have no expiration date. The position can be held indefinitely as long as there is sufficient margin. A funding rate mechanism is used to balance the market.

7. Funding Rate

This is a fee that is periodically paid between traders:

In the case of positive funding, longs pay.

In the case of negative funding, shorts pay.

Funding keeps the futures price closer to the spot price.

8. Main goals of futures trading

1) Speculation

The main goal for most traders is to profit from price fluctuations.

2) Hedging

Businesses and investors use futures to reduce risks. For example, miners can lock in a future BTC price.

3) Arbitrage

Earnings from the difference between the spot and futures prices.

9. Advantages of futures

The ability to profit from both rising and falling prices.

High liquidity.

Working with leverage.

Low fees.

No need to own the asset.

10. Risks of futures trading

High volatility.

Risk of liquidation.

Misuse of leverage.

Psychological pressure.

Possible losses exceeding the deposit (in cross-margin).

Futures are suitable only for traders who use risk management and discipline.

11. Conclusion

Futures trading is a powerful financial tool that allows traders to work with large positions, hedge risks, and engage in active speculation. However, it requires a deep understanding of market mechanics, sound risk management, and strict discipline.

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