Introduction
Futures trading is a high-risk, high-reward financial instrument that allows traders to amplify profits with minimal capital. However, it can also lead to significant losses. Before diving into futures trading, assessing your risk tolerance is crucial for effective utilization.
This guide is designed for beginners exploring Bitget's futures products. It covers essential concepts, operational mechanisms, and the inherent risks and rewards of futures trading.
What is Futures Trading?
Futures trading is a derivative financial product that enables investors to profit from both rising (long) and falling (short) markets using leverage. Unlike spot trading, futures allow traders to magnify gains (or losses) by borrowing capital.
👉 Bitget Futures offers 200+ margin trading pairs with leverage up to 125x. For example:
- If Bitcoin's price is expected to rise, a trader can open a long position with leverage.
- If the price falls, a short position can yield profits.
Types of Futures Contracts
Cryptocurrency futures are categorized into two main types:
| Type | Settlement Currency | Leverage | Example |
|---|---|---|---|
| USDT-Margined | Stablecoins (USDT) | Up to 125x | BTCUSDT, ETHUSDC |
| Coin-Margined | Cryptocurrencies | Up to 125x | BTCUSD, ETHUSD |
Key Differences:
- USDT-Margined (Perpetual): No expiry date; ideal for beginners.
- Coin-Margined (Perpetual/Delivery): Perpetual has no expiry, while delivery contracts settle at a fixed date.
How Futures Trading Works
Futures operate on leverage, enabling traders to control larger positions with smaller capital. Here’s an example:
- Scenario: Trader A has 10,000 USDT and predicts Bitcoin will rise from $50,000.
- Action: Uses 10x leverage to borrow 90,000 USDT, opening a 100,000 USDT position.
- Outcome: If Bitcoin rises to $60,000, Trader A earns 20,000 USDT profit (minus fees).
Critical Variables:
- Leverage size (higher leverage = higher risk).
- Direction (long/short).
- Position management (hold, close, or adjust).
⚠️ Risk: If Bitcoin drops, Trader A may face liquidation unless additional funds are added.
Pros and Cons of Futures Trading
✅ Advantages:
- High Leverage: Amplify gains with minimal capital.
- Fast Profits: Achieve returns quicker than spot trading.
- Short-Selling: Profit from bear markets.
- Hedging: Protect portfolios against price declines.
❌ Disadvantages:
- Liquidation Risk: High leverage can wipe out capital rapidly.
- Complexity: Requires understanding of margin, funding rates, and position management.
👉 Avoiding Liquidation – Learn risk management strategies.
Key Terminology in Futures Trading
Margin Types:
- Initial Margin: Capital required to open a position.
- Maintenance Margin: Minimum capital to keep a position open.
Order Types:
- Market/Limit Orders: Immediate vs. price-specific execution.
- Stop-Loss/Take-Profit: Automatically close positions at set prices.
- Funding Rate: Periodic payments between long/short traders to balance perpetual contract prices.
FAQs
1. Is futures trading suitable for beginners?
Futures involve high risk. Beginners should start with low leverage and practice risk management.
2. How does leverage affect profits/losses?
Leverage multiplies both gains and losses. For example, 10x leverage turns a 5% price move into a 50% profit (or loss).
3. What’s the difference between USDT and coin-margined futures?
USDT contracts are settled in stablecoins, while coin-margined contracts use cryptocurrencies like BTC.
4. How can I avoid liquidation?
- Use lower leverage.
- Monitor positions and adjust stop-loss orders.
- Maintain sufficient margin.
Conclusion
Futures trading offers lucrative opportunities but demands disciplined risk management. Start with small positions, understand key concepts, and utilize Bitget’s tools to navigate the market effectively.
👉 Start Your First Futures Trade – A step-by-step guide for beginners.