If you’ve ever felt like regular crypto trading isn’t thrilling (or terrifying) enough, let me introduce you to futures contracts—where the stakes are higher, the rewards can be massive, and the risks? Well, they can be devastating if you’re not careful.
But before we get into the details, let’s be real. Most new traders don’t actually know what futures are when they first jump in. They see words like "leverage," "long," and "short," and think, "Sounds fancy! Let’s make some money! - only to get liquidated before finishing their cigarette. (Luka, this sentence is dedicated to you).
So, let’s actually understand this. What are futures, how do they work, and how do they compare to your good old-fashioned spot trading?
What Are Futures Contracts?
A futures contract is an agreement to buy or sell an asset at a set price on a future date. It’s a little like saying:
"Hey, I’ll buy Bitcoin from you at $50,000 next month, no matter what the actual price is."
Now, if Bitcoin jumps to $60,000 by then, you win because you’re getting it cheaper than market price. If Bitcoin drops to $40,000, well… congratulations, you just overpaid.
But here’s the trick: you don’t actually have to own the asset. You’re just betting on the price movement. And because of that, you can profit whether prices go up or down.
That’s where longs and shorts come in:
Going long = Betting the price will go up.
Going short = Betting the price will go down.
Unlike spot trading, where you actually buy and hold crypto, futures trading is all about speculation. It’s like playing chess against the market, except sometimes the market flips the board over and takes your money anyway.
How Are Futures Different from Spot Trading?
Now, let’s compare futures with the simpler, more familiar world of spot trading.
1. Ownership
Spot Trading: You actually own the crypto. Buy 1 BTC? It’s yours. You can send it to a wallet, hold it for years, or even brag about it at parties.
Futures Trading: You don’t own the crypto. You’re just making bets on whether the price goes up or down. No bragging rights, just numbers on a screen.
2. Leverage
Spot Trading: If you have $1,000, you can buy $1,000 worth of Bitcoin. Simple.
Futures Trading: Leverage lets you control way more money than you actually have. With 10x leverage, that same $1,000 lets you trade $10,000 worth of Bitcoin. More risk, more reward… or more pain.
3. Profit Potential (And Loss Potential)
Spot Trading: If Bitcoin goes up 10%, your $1,000 turns into $1,100. Pretty straightforward.
Futures Trading: With 10x leverage, a 10% Bitcoin move means 100% gain (your $1,000 becomes $2,000). But if it moves against you by just 10%, your position is wiped out. Game over.
4. Making Money When Prices Fall
Spot Trading: If Bitcoin is crashing, there’s nothing you can do except hold on for dear life.
Futures Trading: You can short the market, meaning you make money when prices drop. This is how traders profit even during bear markets.
5. Expiry Dates
Spot Trading: No expiry. You can hold your crypto forever.
Futures Trading: Some contracts have expiration dates, meaning they settle at a specific time (except for perpetual futures, which never expire).
Things You Should Absolutely Know Before Trading Futures
If you’re thinking, Wow, futures sound amazing! Let’s go all in!—hold on. Let’s talk about the fine print before you turn your portfolio into a horror story.
1. Leverage Can Ruin You (Quickly)
Yes, leverage gives you bigger gains, but it also makes losses 10x faster. One bad move, and your entire position can be wiped out. Liquidation is real, and it doesn’t care about your feelings.
2. Risk Management is Everything
Good futures traders don’t just make random bets. They set stop-losses (to limit losses), use take-profit levels, and manage risk like their financial lives depend on it—because they do.
3. The Market is Ruthless
Crypto is volatile. Prices can spike or drop by 10% in minutes. If you don’t have a plan, you’re just gambling. And let’s be honest—the market loves to take money from people who don’t know what they’re doing.
4. Funding Rates Exist
If you hold a futures position for a long time, you might have to pay funding fees to keep it open. If you don’t pay attention, these can slowly eat into your balance.
5. Emotional Trading = Disaster
If you panic and close a trade too early, the market will magically go in the direction you originally thought it would. If you get greedy and refuse to take profits, the market will magically reverse. It’s like it knows.
So, Should You Trade Futures?
If you:
✅ Have solid risk management skills
✅ Understand leverage and liquidation
✅ Can keep emotions out of trading
✅ Want the ability to profit in any market condition
Then futures trading could be a great tool for you.
But if you:
❌ Have never traded before
❌ Get emotional when prices move against you
❌ Don’t have a clear strategy
❌ Think leverage is a cheat code for easy money
Then stick to spot trading—at least until you really understand what you’re doing.
Disclaimer: This article is for informational purposes only and should not be considered legal, tax, investment, financial, or any other form of professional advice. Always do your own research before making any decisions.
Great post, useful