What crypto futures are
A futures contract is an agreement to settle the difference between an entry price and an exit price — no actual coins change hands in most crypto futures. The dominant instrument is the perpetual future ("perp"): a futures contract with no expiry date, which you can hold as long as your margin allows. Perpetuals are the dominant form of crypto futures trading on major venues.
Futures offer more tools than spot — short selling, leverage, hedging — and correspondingly more ways to lose money quickly. The concepts below are the minimum to understand before a first position.
Long and short: trading both directions
- Long — a position that profits if price rises.
- Short — a position that profits if price falls.
The ability to short is the biggest structural difference from spot. In a falling market, a spot holder's main option is to sell; a futures trader can position directly for the decline. It also means the market has two crowds whose positioning can be measured — see our long/short ratio guide.
Leverage: what it actually does
Leverage lets you control a position larger than your capital. With 10x leverage, $1,000 of margin controls a $10,000 position — and a 1% price move becomes a 10% gain or loss on your capital. The mechanics are symmetric; the outcomes usually aren't, because of liquidation.
Liquidation is the forced closure of your position when losses approach your margin. At 10x leverage, roughly a 10% adverse move wipes the position; at 20x, roughly 5%. In a market where 5% intraday swings are routine, high leverage converts ordinary volatility into account-ending events. How liquidations ripple through the market is covered in the liquidation data guide.
Isolated vs cross margin
| Mode | How it works | When it fits |
|---|---|---|
| Isolated | Margin is assigned to one position; a liquidation loses only that margin | When you want losses strictly capped per trade |
| Cross | Your whole account balance backs all positions | Absorbing temporary swings across positions — with the whole account at stake |
Isolated margin is the safer starting point: it makes the worst case explicit. Cross margin has legitimate uses but turns one bad position into a threat to the entire balance.
Funding: the cost of holding a perp
Because perps never expire, exchanges use periodic funding payments — typically every 8 hours — to keep the contract price anchored to spot. When longs dominate, longs pay shorts; when shorts dominate, shorts pay longs. Over days and weeks this cost compounds into a real drag on a position. The full mechanics are in our funding rates guide.
A pre-trade checklist
- Start with low leverage — 1–3x — until liquidation mechanics feel intuitive. High multiples deserve caution even for experienced traders.
- Decide your stop-loss and target before entering. A leveraged position without a stop is directly exposed to liquidation. See stop-losses and take-profits.
- Cap position size relative to your account — many traders keep any single position under 5–10% of capital.
- Check how crowded the market is before entering: long/short ratios and funding across four exchanges give a quick read on whether your side of the trade is already packed.
- Be willing to consider both directions — futures allow either long or short exposure, and market conditions determine which fits.
Position sizing and drawdown rules matter more than any single entry — the framework is in our risk management guide.