Futures trading allows you to speculate on the future price movements of an asset. By going long or short on a contract, you can potentially profit whether markets are rising or falling. On platforms like KuCoin Futures, you can also use leverage to amplify your exposure, hedge existing positions, or capitalize on market volatility.
This guide walks you through the core concepts of futures trading on the KuCoin app, explaining how long and short positions work, how to calculate profits and losses, and the steps to place your first trade.
What Does Going Long or Short Mean?
In traditional spot trading, you can only profit when the price of an asset increases. Futures contracts remove this limitation. They provide the flexibility to profit in both bullish and bearish market conditions.
- Going Long: You enter a long position when you believe the price of the contract will increase. If the market moves up, your trade is profitable.
- Going Short: You open a short position when you anticipate the price will decrease. If the market falls, you stand to gain.
This ability to profit from downward price movements is one of the key advantages of futures markets.
Examples of Long and Short Trades
Here are two practical examples using a BTC/USDT perpetual contract to illustrate how long and short trades work:
Example 1: Long BTC/USDT Trade
| Parameter | Value |
|---|---|
| Initial Margin | 100 USDT |
| Leverage | 100x |
| Entry Price | 40,000 USDT |
| Closing Price | 50,000 USDT |
| Position P&L | 2,500 USDT |
In this scenario, the trader used 100 USDT with 100x leverage to open a long position. When BTC’s price increased from 40,000 to 50,000 USDT, the position generated a profit of 2,500 USDT.
Example 2: Short BTC/USDT Trade
| Parameter | Value |
|---|---|
| Initial Margin | 100 USDT |
| Leverage | 100x |
| Entry Price | 50,000 USDT |
| Closing Price | 40,000 USDT |
| Position P&L | 2,000 USDT |
Here, the trader opened a short position as they expected the price to drop. When BTC fell from 50,000 to 40,000 USDT, the trade resulted in a profit of 2,000 USDT.
These examples show how leverage can magnify gains—but it’s important to remember that it also increases potential losses.
How to Trade Futures on the KuCoin App
If you’re new to futures trading on KuCoin, follow these steps to get started:
- Fund Your Account: Transfer USDT or USDC into your USDT-margined futures account to use as margin. For coin-margined contracts, transfer cryptocurrencies like BTC or ETH.
- Select Leverage: Choose your desired leverage multiplier. Higher leverage increases both potential profit and risk.
- Choose Direction: Decide whether to go long (buy) or short (sell) based on your market outlook.
- Set Position Size: Enter the number of contracts you wish to trade and confirm the order.
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Always start with a small position and low leverage until you become familiar with how futures markets behave.
Calculating Profit, Loss, and Return Rate
Understanding how to calculate your unrealized P&L (Profit and Loss) and return rate is essential for effective risk management. The formulas differ slightly depending on the margin type.
For USDT-Margined Contracts
- Unrealized P&L = Position Size × Contract Multiplier × (Mark Price – Entry Price)
- Return Rate = (Unrealized P&L / Initial Margin) × 100
Where Initial Margin = (Position Size × Contract Multiplier × Entry Price) / Leverage
For Coin-Margined Contracts
- Unrealized P&L = Position Size × Contract Multiplier × (1/Entry Price – 1/Mark Price)
- Return Rate = (Unrealized P&L / Initial Margin) × 100
Where Initial Margin = (Position Size × Contract Multiplier / Entry Price) / Leverage
These calculations help you monitor trading performance and manage exposure in real time.
Frequently Asked Questions
What is the difference between going long and going short?
Going long means buying a contract with the expectation that its price will rise. Going short means selling a contract, expecting the price to fall. Both strategies allow traders to profit in different market conditions.
Is futures trading risky?
Yes, futures trading involves significant risk, especially when using high leverage. Prices can be volatile, and it is possible to lose more than your initial margin. risk management strategies are essential.
What is leverage in futures trading?
Leverage allows you to open a larger position with a smaller amount of capital. For example, 10x leverage lets you control a $1,000 position with only $100. While it can amplify profits, it also magnifies losses.
Can I use futures to hedge my spot portfolio?
Yes, one common use of futures is hedging. If you hold Bitcoin and are concerned about a short-term price drop, you can open a short futures position to offset potential losses in your spot holdings.
What are the margin requirements?
Margin is the collateral required to open and maintain a leveraged position. The amount depends on the leverage multiplier and the size of the position. Each platform has its own maintenance margin requirements to prevent liquidation.
Who can trade futures?
Futures trading is subject to regional regulations. Some countries and regions restrict access to derivative products. Always check whether these instruments are available in your location before proceeding.
Futures trading offers powerful tools for those looking to diversify their strategies, hedge risk, or speculate on market movements. With a clear understanding of core mechanics—such as going long, going short, and using leverage—you can more confidently participate in these markets.