What a futures contract is
A futures contract is an agreement about a price. Instead of buying a coin, you open a position that gains or loses value as the coin's price moves. You never hold the coin, so there is nothing to withdraw or store. You only hold a position and the collateral backing it.
If you open a long, you profit when the price rises and lose when it falls. If you open a short, it is the opposite. That symmetry is the main reason people use futures at all: spot lets you profit from a falling market only by selling something you already own.
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Perpetual vs dated futures
There are two common types.
Dated futures expire on a set date. On that day the contract price is settled against the spot price, so the two are forced together.
Perpetual futures never expire. You can hold one for ten minutes or ten months, as long as you keep enough margin. That convenience creates a question: what keeps the contract price near the real price of the coin? The answer is funding, a periodic payment between longs and shorts. When the perpetual trades above spot, longs pay shorts, and when it trades below, shorts pay longs. The details, including how it adds up on a position you hold for days, are in funding rate explained.
Perpetuals dominate crypto trading volume, which is why most people who say "futures" mean them.
USDT-margined vs coin-margined
This is about what currency your collateral and profits are in.
USDT-margined (also called linear) contracts use a dollar-pegged stablecoin as margin. Your profit and loss are in USDT, and one unit of the contract has a stable dollar-style value. It is the easier model to reason about, and it is what most beginners start with.
Coin-margined (inverse) contracts use the underlying coin as margin. If you go long BTC with BTC as collateral, your collateral itself moves with the market. Your account value in dollar terms then changes both from the trade and from the collateral, which makes the arithmetic less intuitive and the risk less obvious.
Pick the model you can calculate on paper. If you cannot predict your dollar loss before you open the trade, you are not ready for that contract.
Margin: initial and maintenance
Margin is the collateral that backs your position.
Initial margin is what you post to open. It equals the position's notional value divided by your leverage. A 1,000 position at 10x needs 100 of initial margin.
Maintenance margin is the minimum equity the exchange requires to keep the position open. If losses push your equity below it, the position is liquidated. Exact percentages vary by contract and position size, so read them on the exchange rather than assuming.
Leverage itself, and why the number you choose changes how close liquidation sits, is covered in crypto leverage explained. Here is the short version: more leverage means less margin per unit of exposure, which means less room before the exchange closes you out.
Cross vs isolated margin
Isolated margin assigns a fixed amount to one position. If it is liquidated, you lose that amount and nothing else.
Cross margin lets all your positions share the whole account balance as collateral. It lowers the chance of a single position being liquidated, but a bad enough move can take the entire balance with it.
Beginners are usually better served by isolated margin, because the maximum loss is known before you click.
Mark price vs last price
Two prices matter and they are not the same.
The last price is where the most recent trade on that contract happened. It can spike on a thin order book.
The mark price is a reference price, typically derived from spot indices and a smoothed premium, which exchanges use to calculate unrealised profit and to trigger liquidation. The point of it is to stop a single manipulated or illiquid trade from liquidating everyone.
Practical consequence: you can see a wick on the chart that touched your liquidation level and not be liquidated, because the mark price never got there. The opposite can also happen. Check which price your stop orders trigger on, since many exchanges let you choose per order.
Liquidation
Liquidation is the forced closing of your position when the mark price reaches the level where your margin is nearly gone. You do not get a phone call. The exchange closes the position, often charges a liquidation fee, and you keep whatever is left, which is often nothing.
Liquidation is the end of a trade you did not plan. A stop-loss is the same loss on your terms, and it is nearly always closer than the liquidation price. Placement of stops and targets is in stop-loss and take-profit explained.
Fees: charged on notional, not on margin
This is the part most beginners underestimate.
Exchanges charge a maker fee when your order adds liquidity (a resting limit order that gets filled) and a taker fee when it removes liquidity (a market order, or a limit order that fills immediately). Taker is usually the higher of the two. Both are a percentage of the position's notional value, the full size, not of your margin.
That means leverage does not change the fee rate, it changes how large the fee is compared with your own money.
Worked example (hypothetical numbers, for illustration only). Assume a taker fee of 0.05% per side, so 0.10% for entry plus exit. You use 100 of your own capital, and the price moves in your favour by 0.5%.
| | 1x | 10x | |---|---|---| | Position size (notional) | 100 | 1,000 | | Gross gain at +0.5% | 0.50 | 5.00 | | Round-trip fee (0.10% of notional) | 0.10 | 1.00 | | Net result | +0.40 | +4.00 | | Net as % of your 100 | +0.4% | +4.0% | | Fee as % of your 100 | 0.1% | 1.0% |
Now the same trade, but the price only moves +0.08%.
| | 1x | 10x | |---|---|---| | Gross gain at +0.08% | 0.08 | 0.80 | | Round-trip fee | 0.10 | 1.00 | | Net result | -0.02 | -0.20 | | Net as % of your 100 | -0.02% | -0.2% |
The price moved the right way and you still lost money, because the move was smaller than the round-trip cost. At 10x the loss is ten times bigger relative to your capital. Fees are a fixed share of the move at any leverage, but they are a bigger slice of your capital when the position is larger. If you trade often, that slice is paid again each time.
Funding payments, if you hold across a settlement, come on top.
When futures make sense vs spot
Futures make sense when you need something spot cannot give you:
- Shorting a coin you believe is overpriced.
- Hedging a spot holding you do not want to sell.
- Capital efficiency, where a position's size is set by a stop-loss distance and risk budget, not by how much you can afford to buy outright. See risk management in crypto trading.
Spot makes sense when you want to hold a coin for a long time, when you do not want liquidation risk, or when you are still learning. Spot has no funding, no margin calls and a loss limited to what you paid.
A long-term buyer who uses futures just to get a bigger number on the screen is taking on the costs without using the features.
Is crypto futures trading still viable?
The honest answer is that it depends on two things: your costs and your edge. This is reasoning, not a statistic.
Every trade pays fees, a spread or slippage, and sometimes funding. These costs are roughly known in advance. An edge, meaning an average gain per trade before costs, is not known in advance and has to be measured. For short-term trading the typical per-trade move a signal captures is small, and many of those edges are smaller than the round-trip cost. When that is true, the strategy loses money net of costs even if it is right more than half the time on direction.
So futures are viable for a trader who has measured a net-of-fees edge on enough trades, uses a stop on every position and sizes risk deliberately. They are a poor fit for someone who has seen a chart that looks like it works. If you are weighing active styles, day trading explained covers how cost drag changes as you trade more often.
Market conditions matter too. A method that works in a trend may bleed in a range, which is the subject of market regimes explained.
The biggest beginner mistake
Using leverage to make a small account feel bigger, with no stop-loss.
It is tempting: a 1% move becomes 10% at 10x, and 20% at 20x. But the same move against you is also magnified, your liquidation level gets closer, and every extra entry and exit pays fees on the larger position. The account then depends on being right quickly, and on the price not wicking through your level on the way.
The fix is dull. Decide how much you can lose on the trade before you enter, put the stop there, and let that decide the size. Leverage becomes a result of that arithmetic, not a goal.
What a public futures record shows
A claim about futures is easy to make and hard to check. A record can be checked, if it includes costs.
Darwin Lab is a self-evolving genetic-algorithm bot built for Binance Futures, trading USDT-margined perpetuals. It traded real money there from April to June 2026. Funds were then pulled so that fee drag could be fixed, and since June 2026 its signals have run on paper. The paper engine charges a full round-trip taker fee on every trade, so the numbers are not flattered by free execution.
Measured net of fees, its published paper signals have not yet shown an edge over random entries with the same stops and targets. That is a result worth stating plainly, because it is what the costs described above predict is common: a strategy has to beat a coin flip by more than the fees before it earns anything.
You can read the fee-inclusive record yourself at the track record. It is educational information, not financial advice.