Futures – what is it in trading?

In the classical sense, a futures contract refers to an agreement where the seller must deliver the goods to the buyer within a specified period. The market price of the goods may change by that time, but the price specified in the futures contract remains the same. Therefore, if the price of the goods increases during the duration of the futures contract, the buyer benefits because they obtain it at a lower price than the market price. Conversely, if the price decreases, the futures contract is advantageous for the seller.

Futures contracts are a convenient tool for short-term trading, primarily for speculation, as they simplify trading operations. The terms "buying" and "selling" are conditional in the case of futures contracts since it is not necessary to own the underlying asset to sell a futures contract. As a derivative instrument, a futures contract does not provide the same rights as owning the underlying asset, so it is not suitable for long-term investments.

Futures contracts in the cryptocurrency market do not involve ownership of a specific coin, which means they cannot be withdrawn from the exchange. By trading futures contracts, you make a prediction about the price increase (long position) or price decrease (short position) with the available leverage.

When trading in the futures market, users pay exchange fees for using borrowed funds, and there may be funding charges deducted from their account. Funding refers to the collection of funds to cover the price difference between the cryptocurrency in the spot market and its futures contract. If there are many long positions in the market, they pay funding to short positions. If sellers dominate the market, the exchange deducts funding from them to support buyers.