Futures Trading
Trade contracts, profit from both rises and falls
Futures: Trading Without Owning
In futures trading, you do not buy or sell the actual cryptocurrency. Instead, you trade a contract that tracks the price.
This means you can profit whether the price goes up or down. Futures also allow you to use leverage — trading with more capital than you actually have.
This flexibility comes with significantly higher risk. Futures are not recommended as a starting point — understand spot first.
Going Long — Betting on a Rise
Opening a Long position means you expect the price to go up.
Example: BTC is at $95,000. You open a Long with $200 and 5x leverage — your position size is $1,000.
If BTC rises to $100,000 (+5.3%), your profit is approximately $53 on your $200.
If BTC drops to $90,000, you are in loss. At some point, the loss reaches your margin and you get liquidated — your $200 is gone.
Going Short — Betting on a Drop
Opening a Short position means you expect the price to go down.
Example: BTC is at $95,000. You open a Short. If BTC falls to $90,000, you profit. If BTC rises, you lose.
Short selling does not exist in spot — it is one of the unique abilities of futures markets. This makes futures useful as a hedge: if you hold BTC on spot and want to protect against a short-term drop, you can short futures.
Funding Rate — The Hidden Cost
Perpetual futures have no expiry date, but they stay anchored to the spot price through a mechanism called the funding rate.
Every 8 hours, one side pays the other. When longs outnumber shorts, longs pay shorts. When shorts dominate, shorts pay longs.
Funding rate is typically small (0.01% per 8h) but it adds up over time. If you hold a long position for a week during a bull market, you will pay funding every 8 hours — this is a real cost to account for.
You open a Short position on BTC at $95,000. The price rises to $100,000. What happens?
- You profit — price moved up
- You lose — you bet on a drop but price rose
- Nothing — shorts are not affected by price rises
- You get funding payments