Summary
● Futures trading is a high-risk, high-reward product that allows you to amplify profits with minimal capital. However, it can also lead to significant losses. Before diving in, assess your risk tolerance to use futures effectively.
● This guide is tailored for beginners, helping investors understand Bitget's futures products, key terminologies, and the inherent risks and rewards.
● The article covers:
- What futures trading is
- Types of futures contracts
- How futures trading works
- Pros and cons of futures trading
- Glossary of common terms
👉 Ready to start? Learn how to execute your first futures trade here.
What Is Futures Trading?
Futures trading is a financial derivative that enables investors to profit from both rising (long) and falling (short) markets using leverage. Unlike spot trading, futures allow amplified gains (or losses) through borrowed capital.
For example, if you predict Bitcoin's price will rise, you can open a leveraged long position. Conversely, if you anticipate a drop, a short position lets you profit from the decline.
👉 Explore Bitget's futures markets with 200+ trading pairs and up to 125x leverage.
Types of Futures Contracts
Cryptocurrency futures fall into two categories:
1. USDT-Margined (Linear) Contracts
- Settled in stablecoins (e.g., USDT, USDC).
- Example:
BTCUSDT. - No expiry date (perpetual contracts).
2. Coin-Margined (Inverse) Contracts
- Settled in crypto (e.g., BTC, ETH).
Subtypes:
- Perpetual Contracts: No expiry.
- Delivery Contracts: Fixed settlement date.
| Feature | USDT-Margined | Coin-Margined (Perpetual) | Coin-Margined (Delivery) |
|----------------------|--------------|--------------------------|-------------------------|
| Settlement Asset | USDT/USDC | BTC/ETH | BTC/ETH |
| Leverage | Up to 125x | Up to 125x | Up to 125x |
| Expiry | None | None | Fixed date |
How Futures Work
Futures operate on borrowed capital. Here’s a simplified example:
- Scenario: You deposit 10,000 USDT and use 10x leverage to open a 100,000 USDT position.
- Outcome A (Profit): If Bitcoin rises 10%, your profit is 10,000 USDT (100,000 × 10%).
- Outcome B (Loss): A 10% drop wipes out your initial margin (liquidation).
Key Variables:
- Leverage level (higher = greater risk).
- Long vs. short positioning.
- Market volatility.
⚠️ Risk Warning: Leverage magnifies both gains and losses. Always monitor positions to avoid liquidation.
Pros and Cons of Futures Trading
✅ Advantages
- High Leverage: Amplify gains (up to 125x).
- Fast Profits: Earn multiples of your initial capital.
- Short Selling: Profit in bear markets.
- Hedging: Protect spot holdings from downturns.
❌ Disadvantages
- Liquidation Risk: Positions can be forcibly closed if margins drop below maintenance levels.
- Complexity: Requires understanding of margin ratios, funding rates, and order types.
📖 Learn More: How to avoid liquidation.
Key Terminologies
Margin: Collateral required to open/maintain positions.
- Maintenance Margin: Minimum funds to avoid liquidation.
- Isolated vs. Cross Margin: Isolated limits risk to one position; cross uses entire balance.
Order Types:
- Market/Limit Orders: Immediate vs. price-specific execution.
- Stop-Loss/Take-Profit: Automate risk management.
- Funding Rates: Periodic payments between long/short traders to balance perpetual contract prices.
FAQ
❓ Can I trade futures with a small account?
Yes, but start with low leverage (e.g., 5x–10x) to minimize risk.
❓ What happens if I get liquidated?
Your position closes automatically, and you lose the initial margin.
❓ How are funding rates calculated?
Rates adjust every 8 hours based on market demand (longs pay shorts or vice versa).
Next Steps
- Practice: Use Bitget’s demo mode to test strategies.
- Start Small: Begin with minimal leverage.
- Stay Informed: Monitor market trends and adjust positions accordingly.
🚀 Begin Trading: Your first futures trade awaits.