FTX futures trading guide
Learn how to trade crypto futures on FTX with this visual step-by-step guide
What is FTX Futures?
FTX Futures is a part of the derivatives section of the FTX cryptocurrency derivatives exchange. Claiming to be the platform "built by traders, for traders", FTX offers traders the ability to access leverage, multiple trade options and an advanced charting user interface.
FTX supports a wide variety of cryptocurrency futures, including Bitcoin (BTC) and Ethereum (ETH). All can be traded either by entering long or short positions. Long positions allow traders to profit if a cryptocurrency appreciates in value. Alternatively, short positions allow traders to profit if the value of a cryptocurrency depreciates.
To amplify returns, FTX Futures allows traders to use existing holdings as margin and, therefore, increase the position size of trades. On the FTX platform, the provision of collateral is achieved primarily via stablecoins – although some cryptocurrencies can also be used. Stablecoins like USDC, TUSD, USDT, BUSD and HUSD can either be deposited directly to a futures account or transferred from an FTX spot exchange account.
Futures are considered an advanced trading product when compared with trading standard spot markets. As a result, they carry considerably more risks.
What can I trade on FTX Futures?
Not all cryptocurrencies that are available on the spot market can be traded on the futures market. However, FTX Futures still offers a vast range of crypto assets for leveraged trading. This includes:
- FTX Token (FTT)
- Bitcoin (BTC)
- Ethereum (ETH)
- Binance Coin (BNB)
- ChainLink (LINK)
- MakerDAO (MKR)
- OMG Network (OMG)
- Solana (SOL)
- SushiSwap (SUSHI)
Types of contracts
There are 2 kinds of futures contracts that you can access on FTX Futures: quarterly and perpetual futures.
Quarterly futures are delivery contracts that have to be settled on a particular agreed-upon date, known as the delivery date. These are a standard form of futures contract that are often used in the traditional financial markets.
The buyer is obliged, per the contract, to purchase and receive the asset in question at a predetermined price on the date of its expiration. The seller, on the other hand, is obligated to provide and deliver the asset on the delivery date. Depending on the performance of the asset, this can be an incredibly lucrative or costly investment. However, for retail traders, futures contracts are usually terminated before delivery is required.
FTX futures contracts have a fixed lifespan and will expire depending on their respective calendar cycle. After the expiry of a futures position on quarterlies, the trader will receive their USD Profit and Loss (PNL).
Unlike quarterly futures, perpetual contracts are trading contracts that have no definite settlement time. This means that users can "perpetually" hold a contract position indefinitely until they decide to close or are forced to close-out. Unlike traditional futures contracts, this means a trader only has to worry about whether the asset price is moving up or down. There is no longer a time element involved.
Perpetual contracts require the payment of funding rates. Every hour, the perpetual contract price is checked against the underlying asset price. If the perpetual contract is above, traders with long positions pay traders with short positions a funding rate. The opposite is true if the perpetual contract is below the underlying asset. For more information on funding rates, please click here.
Here is a simple table of comparisons for perpetual and delivery contracts:
|Perpetual Contracts||Quarterly Contracts|
|Contracts||BTC PERP||BTC Quarterly|
|Expiry Date||Perpetual||12/31/2021, 11:00:00 AM|
|Funding Rate and Settlement Fee||Position size * TWAP of ((future - index) / index) / 24||No funding rate|
FTX Futures features
Leverage refers to borrowing money from the platform to increase the position of an asset. FTX Futures allow traders to set leverage from 1x to 20x on futures contracts, with 10x available on the spot market.
While profits, losses and collateral are in USD-pegged stablecoins by default, FTX also supports other tokens as collateral. Unlike other exchanges that only support major coins such as USDT, BTC and ETH, FTX Futures offers cross-margin on a vast range of cryptocurrencies.
Backstop liquidity provider
FTX has a backstop liquidity provider program that allows users to take on the positions of traders that are near bankruptcy. Members of the program are mandated to hold a minimum of $500K on the platform, reducing the likelihood of clawback.
How do I create an FTX account?
FTX has designed the platform to make sure registration is as straightforward and efficient as possible. It only requires a working email address or mobile phone number.
Step 1. Register with an email address or phone number
On the sign-up interface, either through the website or mobile app, you will be asked to share your email address. Make sure that you have access to the email address you're providing since a verification code will be sent there for you to confirm account registration.
Step 2. Log in to your account
There are 2 ways to log in to your account – either through the password you've set or via a QR code. Once you're in, you can start your FTX Futures trading journey.
Just remember to never share your account details with anyone.
Steps to trading on FTX Futures
Step 1. Fund your futures account
To begin trading on FTX Futures, first, you need to deposit funds into your futures account so that they can be used as collateral on leveraged trades. You may collateralise stablecoins or other tokens such as BTC or ETH.
Step 2. Navigate to the futures section
Click the "Futures" tab within the FTX cryptocurrency platform.
Step 3. Choose a cryptocurrency to trade
On the futures interface, click the 3 horizontal lines in the top left corner of the screen, situated beneath the FTX logo. This will show you all of the cryptocurrency pairings that can be traded with futures contracts.
Step 4. Choose your margin position
When entering a position, you will be given a choice between cross margin positions or isolated margin positions. The choice you make will determine what happens if a position moves into liquidation. Liquidation happens when a trade moves against you and you fail to maintain a margin that is proportional to the value of your position.
When you enter an isolated margin trade, only the funds specified as margin will be used to cover your trade. If that position gets liquidated, only the funds placed on that sub-account will be lost.
If you enter a cross margin trade, all assets held within your futures account will be used as margin. If a position is liquidated, all funds will be used to cover costs. This may mean your account is completely wiped out.
Step 5. Choose your order type and leverage amount
After you've chosen the type of margin you wish to use, you then need to decide whether you wish to "Buy" or "Sell". Buying means that you will enter a long position and will profit once the price of a cryptocurrency increases. Selling means that you will enter a short position and will profit once the price of a cryptocurrency decreases.
The next step is to set the level of leverage you wish to apply. Remember, extremely high leverage can result in a much higher chance of liquidation if price moves against you.
When the leverage has been chosen and your entry price provided, the exchange will calculate the amount of maintenance margin required to open the position. It will also provide you with a liquidation price.
After the trade is opened, if the market price reaches the liquidation price, your position will be liquidated. You will lose the amount risked and the funds that were used as a margin.
What are the fees and how do they work?
FTX Futures trading fees
There are 2 parties that make trades possible on the platform: makers and takers. Makers are those who already have existing orders on the platform, while takers accept orders from makers.
|Tier||30 D Volume (USD)||Maker Fees||Taker Fees|
FTX Futures withdrawal and deposit fees
There are no deposit fees.
Withdrawal fees vary depending on the cryptocurrency used.
Small BTC withdrawals (less than 0.01 BTC) are free.
Cryptocurrencies are arguably the most volatile asset class in the world. Major coins can fluctuate 20–100% in a single day. While leverage can potentially amplify rewards for well-positioned trades, it also has a chance of draining accounts if a trade doesn't go according to plan. Futures trades have a predefined liquidation threshold, unlike spot trades.
As with any platform, the facilities used to support the trades are vulnerable to system disruptions or failure, especially during high-volume trading periods. This can result in significant losses if the platform goes offline. A system failure would mean that traders would not be able to monitor positions and make necessary adjustments to prevent losses.
Hackers and scams
While most hackers seem to have shifted their focus to decentralised exchanges, due to more security vulnerabilities and more anonymity, this doesn't mean that centralised platforms, such as FTX, are not on their radar. If the exchange gets hacked, there is always a possibility of losing funds if FTX's insurance funds cannot provide total coverage.
A hacker may also target your account specifically, primarily through phishing attacks. To avoid this, never share any sensitive details with anyone and never click on any suspicious links in emails, messages or ads.
With the above being said, FTX is well-regulated and is known for its innovative crypto-crime technology. It has an excellent reputation and safety record among cryptocurrency exchanges.
Pros and cons
- Affordable trading fees
- Clean, slick and user-friendly interface
- Increased position sizes
- Wide variety of altcoins available for futures trading
- Trading derivatives with margin increases your risk significantly, compared to using the spot market
- Relatively low maximum leverage in order to be regulatory compliant (20x)
Alternatives to FTX Futures
The FTX Futures trading platform allows traders to take on large positions and increase cryptocurrency exposure beyond what spot trading would otherwise allow. The FTX user interface is appealing for both beginner and professional traders, offering all the essential trading features in a concise centralised application.
Its ethos as a platform "built by traders, for traders" echoes in its simplicity, efficiency and ease of use. Alongside the generous amount of cryptocurrency futures contracts, the leverage on offer provides the opportunity to earn rewards far higher than that offered from spot trading.
The platform's maximum leverage is now set to 20x, which is below the industry standard of 100x for BTC. However, this is not necessarily a bad thing for new traders. The lower leverage significantly limits the risk of liquidation, which should make the platform far more appealing for traders first venturing into the futures markets.