What is Futures Trading? (Explained Simply)

▪️Imagine you and your friend agree today on the price of mangoes you will buy next month.

Even if mango prices go up or down by then, you’ll still trade at the price you agreed on.

▪️That’s the basic idea of Futures Trading.

▪️In futures trading, you don’t buy or sell the asset immediately.

Instead, you make an agreement (a contract) to buy or sell it at a fixed price on a specific future date.

This asset could be cryptocurrency, gold, oil, stocks, or commodities.

▪️Key Points to Understand

1. It’s a Contract, Not Instant Delivery

You agree now, but the actual buying/selling happens later.

2. Profit From Price Going Up or Down

If you think the price will go up, you take a Long Position (buy contract).

If you think the price will go down, you take a Short Position (sell contract).

3. Leverage – Small Capital, Big Trades

Futures let you control a big trade with a smaller amount of money.

Example: With $100 and 10x leverage, you can trade as if you have $1,000.

▪️This increases both profits and losses.

4. Settlement Date

Some futures expire on a certain date (delivery or cash settlement).

In crypto, many exchanges offer perpetual futures that have no expiry date.

🔸Why Do People Trade Futures?

Hedging: Protect against future price changes.

Speculation: Try to profit from price movements.

Leverage: Amplify potential returns with less capital.

🔸Risks You Must Know

High leverage means high risk.

You can lose more than your initial investment.

Price can change fast, leading to liquidation (forced closure of your position).

🔸In short:

Futures trading is like agreeing today on a price for something you’ll trade later.

It can bring big profits, but also big losses — so it’s a tool for skilled traders, not for blind guessing.