Leverage means borrowing to run a bigger position. At 10× leverage, a roughly 10% move against you can erase your entire margin — that's liquidation. Our position is plain: beginners should not trade futures. This page exists so you understand the risk, not as a how-to for opening trades.
Spot means you buy the coin itself. A contract buys no coin — it's a bet on direction: go long if you expect a rise, short if you expect a fall, and every 1% move is multiplied by your leverage. The most common product is the perpetual future: no expiry date, holdable indefinitely, with funding rates keeping its price near spot (funding explained in Crypto Fees Explained).
| Spot | Perpetual futures | |
|---|---|---|
| What you hold | The actual coin; withdrawable | A contract; nothing to withdraw |
| P&L | 1× the price move | Multiplied by leverage, e.g. 10× |
| Worst case | Price falls; you hold a cheaper coin | Liquidation; margin gone |
| Extra costs | Trading fees only | Fees + funding rates |
| Who it's for | Every beginner's starting point | Experienced, disciplined traders only |
You post $1,000 of margin and open a 10× long on BTC — a $10,000 position:
Now the uncomfortable part: BTC moving 5–10% in a day is completely ordinary. At 10× leverage, one normal day of volatility can end your position. Higher leverage doesn't demand more skill — it demands more luck. That's not a trading problem; it's arithmetic.
When unrealized losses eat so much of your margin that it can no longer support the position, the exchange force-closes it: liquidation. Two modes matter. Isolated margin: each position has its own margin bucket — a liquidation costs only that bucket. Cross margin: your whole futures balance backs every position — one bad trade can drain the account. And in violent moves, price "wicks" can spike straight through your liquidation price and snap back seconds later. The recovery doesn't matter; your position is already gone.
At your own risk, the harm-reduction rules are only four: isolated margin only, leverage at or below 3×, set the stop-loss before you open, and size positions so a full loss changes nothing about your life. Can't commit to all four? Don't place the first trade. And cost it out first with the fee calculator.
With isolated margin, your maximum loss is that position's margin — you generally can't go negative. Cross margin can consume your entire futures balance. Exact rules vary by platform, which is why beginners who insist on trying should only ever use isolated margin.
There isn't one. If a ceiling must be named: 3× or less, isolated, tiny size. Every doubling of leverage halves the distance to liquidation — ask yourself how many wrong calls in a row you can survive.
Futures are an amplifier, not an edge. They multiply gains, losses and the speed of elimination by the same factor. Outcome data consistently shows futures traders lose at far higher rates than spot holders.
It's a periodic payment between longs and shorts on perpetuals. The longer you hold and the larger your notional position — which leverage inflates — the more you pay or receive. Full explanation in Crypto Fees Explained.