Complete Guide to Futures Trading: Mastering Perpetual and Futures Contract Trading

Want to start trading in the derivatives market? Understanding how to trade futures is the first step toward success. This guide will walk you through the entire process of trading perpetual and futures contracts on modern trading platforms, from opening your initial position to managing it and finally closing it.

Essential Preparations Before Opening a Position: Choosing a Trading Mode

Before placing any orders, traders need to understand several key trading parameters. These choices will directly impact your risk tolerance and trading flexibility.

Margin Mode and Position Mode Selection

First, clarify the margin mode. Trading platforms typically offer two basic modes: cross margin and isolated margin. In cross margin mode, the entire account balance serves as a risk buffer for all positions; in isolated margin mode, funds are allocated separately for each position, meaning losses on one position won’t affect others.

Next is configuring the position mode. The one-way mode allows you to hold only one direction on the same trading pair—opposite orders will automatically close the existing position. Hedge mode (only available for USDT perpetual contracts) allows holding both long and short positions simultaneously, providing greater flexibility for complex strategies. Note that you cannot switch modes if you already have open positions or pending orders.

Leverage Configuration

Leverage determines your initial margin and maintenance margin requirements. Different risk levels support different maximum leverage. Changing the leverage will adjust the initial and maintenance margin requirements accordingly. It’s important to remember: higher leverage means smaller price movements can trigger liquidation, so use it cautiously.

Placing Orders: How to Effectively Open Positions in Futures

Understanding various order types and parameter settings is fundamental to successful trading.

Order Types and Execution Methods

Modern futures platforms offer multiple order types. Limit orders let you specify a particular price; market orders execute immediately at the current market price. Conditional orders activate automatically when trigger prices are reached, which is useful for risk management.

Each order can also be configured with an execution strategy. GTC (Good Till Canceled) is the default, meaning the order remains active until canceled. IOC (Immediate or Cancel) requires immediate execution of as much as possible, canceling the rest if not filled immediately. FOK (Fill or Kill) is more strict—it requires the entire order to be filled immediately; otherwise, the entire order is canceled.

For limit orders, you can choose the “Maker Only” option to avoid executing as a taker (passive order). Market orders default to taker execution and do not have a “Maker Only” option.

Price Setting Details

Understanding the difference between order price and trigger price is crucial. Different order types require different price configurations. Some conditional orders use the last traded price as the trigger, while others use the mark price. This choice affects when the order is triggered and should be selected based on your specific strategy.

Order Quantity and Risk Management

Order size can be specified by contract quantity, margin cost, or risk amount. Choosing different calculation methods affects the final order quantity, allowing traders to more precisely control position size.

Profit Protection in Futures Trading: Setting Take Profit and Stop Loss

Effective risk management relies on the proper use of take profit (TP) and stop loss (SL) orders. These tools enable you to automatically set protective orders after opening a position.

Once an order is executed, the system will automatically place TP/SL orders based on your preset parameters. If you want to modify these orders later, you can update unfilled limit orders under the “Current Orders” tab or adjust the TP/SL settings of your open position under the “Positions” tab.

Key Tips for Position Management: Flexibly Adjust Margin

For traders using isolated margin mode, adding or reducing margin on a position is an important capability. This operation can directly influence the liquidation price of the position.

Three Common Scenarios for Adding Margin

When you increase the margin of a position, the liquidation price improves. For example, if you hold a 1 BTC long position with a liquidation price at $9,500, adding $1,000 margin can improve the liquidation price to $8,500.

When you subsequently add a new position in the same direction, the additional margin is distributed across the enlarged position. In the example above, adding another 1 BTC long position results in a total of 2 BTC, and the previously added $1,000 margin is split between the two BTC, raising the new liquidation price to $9,000.

When you partially close a position, the extra margin is reduced proportionally. If you close 50% of the position, the margin decreases to $500. Note that partial closing does not change the liquidation price.

Interaction Between Margin and Leverage

In isolated margin mode, if you add extra margin and then change the leverage, the system resets the initial margin to the standard margin required for the new leverage, and the previously added margin is cleared. Be aware of this mechanism.

Mark Price: Understanding a Key Reference in Futures

In futures trading, the mark price (not the last traded price) is used as the basis for liquidation and unrealized profit and loss calculations. The mark price is a global index reflecting real-time prices from major spot exchanges, combined with basis rate calculations.

You can toggle between displaying the mark price and the last traded price on charts. The mark price is usually marked with a yellow line next to the current last price. The chart will also show a yellow line indicating the mark price’s movement. By default, the chart displays the close of the mark price, but you can adjust this in the chart settings to get a more precise mark price for your position’s direction.

Essential Order Management Operations: Cancel and Close Positions

Cancel Pending Orders

To cancel an unfilled order, simply locate it under the “Current Orders” tab and click the “Cancel” button. Orders that have already been executed cannot be canceled afterward.

Two Core Methods to Close Positions

The first method is using the quick close feature. In the position info area, you’ll see buttons for “Close by Limit” or “Close by Market.” Clicking these will immediately close the entire position.

The second method is placing an opposite order to close the position. In one-way mode, simply place an order in the opposite direction with the same quantity. For example, if you hold a 1 BTC short position, placing a 1 BTC long order will close it. To ensure the order only acts as a closing order, select “Close Only,” preventing opening a new position in the opposite direction.

In hedge mode, the process is more straightforward. Just go to the “Close” tab, select the position you want to close, and click the corresponding “Close” button for that position. The entire position in that direction will be closed.

Understanding these core operations in futures trading will help you execute strategies more effectively and manage risks efficiently. Regularly review your settings to ensure they align with your trading plan—this is key to maintaining disciplined trading.