Definition

Futures Trading involves entering into standardized contracts to buy or sell an asset at a predetermined price on a future date. These contracts are a type of derivative and may involve leverage.

Futures can be used for speculation or hedging purposes.

Example in Context

A trader enters a futures contract to speculate that Bitcoin’s price will increase over the next month, without purchasing the asset directly.

FAQs

Do futures contracts expire?

Yes. Traditional futures contracts have expiration dates, although some crypto futures products may be perpetual.

Does futures trading involve leverage?

Many futures products allow leverage, which increases both risk and potential return.

Is futures trading suitable for beginners?

Futures trading involves additional risks compared to spot trading and may not be appropriate for all participants.

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