📈 How to Trade Futures

~9 min read · For reference, not a prediction

So what exactly is futures trading?

When we say we "buy" a coin, we usually mean we actually own it. Buy 1 BTC and 1 BTC lands in your wallet. This is called spot (trading where the actual coin changes hands).

Futures trading, by contrast, isn't about owning the coin itself — it's about buying and selling a promise (a contract) on whether the price will go up or down. The coin never enters your wallet; only the profit or loss from the price movement gets settled.

The most widely used form in crypto is perpetual futures (perp for short). Regular futures have an expiry date — "three months out," for example — but perpetual futures have no expiry, so you can hold them for as long as you want.

Futures have two defining features. First, you can bet on the price going down too (short). Second, you can control a position larger than the money you put in (leverage).

These two features make the swings in profit and loss much bigger. And that means the risk of losing is far greater than with spot. This article lays out how to make that first trade while keeping the risk as low as possible.

Long and short — betting up, betting down

In futures, a position (the bet you've taken) comes in just two directions. It's not complicated.

• Long = the direction that profits when the price goes "up." It's the familiar idea of buying low and selling high.
• Short = the direction that profits when the price goes "down." You can't do this with spot, but you can with futures. Think of it as selling high (after borrowing) and buying back low.

For example, if you go long on BTC at 100 million won and it rises to 110 million, you profit; if it falls to 90 million, you lose. A short is exactly the opposite.

Both work the same way: get the call right and you make money, get it wrong and you lose. Since the direction ultimately comes down to up or down, no amount of analysis lets anyone reliably predict the next move.

Leverage — why you must start low, no exceptions

Leverage is a feature that multiplies your money so you can control a larger amount. With 10x leverage, you take a 10 million won position using just 1 million won of your own money.

Profits grow 10x, but losses grow 10x too. This is where beginners blow up the most.

Let's see why it's dangerous with numbers. When the price moves against your call and your margin (the money you put up) approaches zero, the exchange forcibly closes your position. This is called liquidation. The higher the leverage, the smaller the price cushion you have before liquidation hits.

The table above shows heavily simplified values that ignore fees, funding, and so on (the actual liquidation price is calculated and shown to you separately by the exchange). Still, it gives you a feel. With 100x, your margin all but vanishes from just a 1% move against you.

Crypto swinging 1–2% in a day is routine, so high leverage tends to end as "right for a moment, then liquidated by a small wiggle."

Margin, and the difference between isolated and cross

Margin is the money you put up as collateral to open a position. Open a 10 million won position at 10x leverage, and 1 million won gets locked up as margin to back it.

If losses eat through all of this margin, that's when you get liquidated.

When you open a position on an exchange, you choose a margin mode: Isolated or Cross. Make sure you understand the difference.

• Isolated = only the margin allocated to this position is at risk. Even if it gets liquidated, you lose exactly that margin and nothing else in your account is touched. The loss is capped clearly, which suits the beginner stage well.
• Cross = your entire account balance is used as collateral for this position. You can hold off liquidation longer, but if it goes wrong your whole account can shrink dramatically all at once.

How to place orders — market vs. limit

The orders you use to open or close a position come in two main types.

• Market = "fill right now at the current price." Fast and certain, but it can fill at a price slightly worse than you wanted, and the fee (taker) is usually higher.
• Limit = "fill when the price reaches the level I set." You can hold out for the price you want and the fee (maker) is usually cheaper, but if the price never gets there, it may not fill at all.

Beginners, eager to "get in right now," tend to use only market orders — and rushing in with a market order often means getting stuck at an expensive price.

Whenever possible, building the habit of setting a limit order in advance — "I'll get in when the price comes to this level" — and waiting will reduce your losses.

Most important of all — always set a stop-loss (SL) and take-profit (TP)

Just following this one section properly can prevent the biggest disasters of the beginner stage. The difference between people who survive a long time in futures and those who get wrecked fast comes down largely to "do you set a stop-loss?"

• Stop-loss (SL) = a preset order that says "if it gets to here, close automatically and cut the loss." Even when you're away from your desk or asleep, the exchange exits for you.
• Take-profit (TP) = a preset order that says "if profit reaches here, close automatically." It keeps you from leaving the timing of taking profit to emotion in the moment.

1. Decide your stop-loss the moment you enterBefore you open a position, first decide the price that means "if it gets here, my read was wrong." Set that price as your stop-loss (SL). If you try to decide after entering, you'll be tempted mid-loss to "hold on just a bit longer," and you'll struggle to cut it.
2. Calculate in advance how much you'll lose on this tradeEntry price minus stop-loss price × position size = the amount you'll lose on this trade. Check that this amount is at a level you can bear (e.g., 1–2% of your seed), and if it's too big, reduce the position.
3. Set a take-profit target at the same timeSetting a take-profit (TP) — "I'm satisfied if it rises this much" — at the same time keeps you from being dragged around by greed. A common approach is to set the take-profit range larger than the stop-loss range (e.g., stop-loss -1%, take-profit +2%).
4. Confirm the orders you set are actually registeredOn the exchange screen, visually confirm that your SL/TP orders show as "active." It's surprisingly common to enter the details but forget to hit the register button, so they're never actually placed.

The liquidation price — how it's set, and what happens when you get liquidated

Liquidation is when losses grow so large that your margin can no longer sustain the position, and the exchange forcibly closes it. The threshold price for that is the liquidation price.

The exchange calculates the liquidation price automatically and shows it on the order screen. Roughly, think of it as "the point starting from your entry price where your margin runs out."

The higher the leverage, the tighter the liquidation price sits to your entry price; the lower the leverage, the farther away it is. That's why, with the same money, lower leverage holds out longer.

If you get liquidated, unlike a stop-loss you lose almost all of the margin tied to that position. A stop-loss exits you early at a small loss you chose, whereas liquidation is the result of being dragged along until the margin runs dry.

On top of that, liquidation can carry its own separate fee, so even for the same loss, cutting it early with a stop-loss is usually better.

Funding fees — a cost that flows back and forth just for holding a position

Perpetual futures have something called a funding fee. Since there's no expiry, it's a cost exchanged between longs and shorts at set intervals to keep the futures price tethered close to the spot price.

The interval for this exchange varies by exchange (commonly every 8 hours, more frequent at some). Just check the guidance of the exchange you're trading on.

• When the funding fee is positive (+) = longs pay shorts. This commonly happens when there are more longs in the market.
• When the funding fee is negative (-) = shorts pay longs. This is when there are more shorts in the market.
• This isn't a fee the exchange takes — it's money exchanged between positions, so depending on which side you're on, you might receive it or pay it.

The amount exchanged each time is usually small (commonly around 0.01%), but it adds up little by little if you hold a position for a long time.

In particular, holding for a long time while the market is skewed in one direction and the funding fee has grown large can cost more than you'd expect. It's a good habit to check a coin's current funding fee before entering.

Position size — never bet it all on one shot

Even all the safeguards we've seen so far (low leverage, isolated margin, stop-loss) lose much of their effect if you throw all your money into a single trade.

The final — and perhaps the most important — rule of trading that survives the long run is "how much do you bet at one time."

• First decide the amount you're okay losing on a single trade. A commonly used conservative benchmark is within 1–2% of your total seed.
• Calculate position size backward as "the loss you can afford ÷ the distance to your stop-loss." Not by gut feel of "about this much."
• If you're going to hold several positions at once, make sure the combined risk of all of them doesn't exceed your limit.
• Only with money you can afford to lose without it affecting your life — never put debt, living expenses, or rent deposit money into futures.

If you're at the stage of signing up for an exchange for the first time → first check out the "How to sign up for an exchange and deposit funds" guide. Once your account and deposit are ready, coming back to this article will make the flow feel natural.

Baro isn't a prediction tool that tells you the price — it's a tool that lets you reference the distribution of how things turned out in similar situations in the past. No tool can guarantee the next price, so please remember that judgment and responsibility always rest with you.