Beginner's Guide to Futures Trading
Content of this article:
What is Long/Short Futures Trading?
How to Calculate Unrealized PnL and Return on Investment (ROI)
What is Futures Trading?
Futures trading allows traders to participate in market movements and profit by going long or short on futures. On XT Futures, you can also use different leverage amounts to reduce risks or amplify potential returns in a volatile market.
What is Long/Short Futures Trading?
In spot trading, traders can only profit when the value of an asset increases. However, futures trading allows traders to profit in both directions (when the asset value rises or falls) by going long or short on futures.
Going long refers to purchasing a future when the trader expects its value to rise in the future.
On the other hand, if a trader expects the future price to drop, they can sell a future to go short.
For example, if you expect the price of BTC to rise, you can buy a BTCUSDT futures contract to go long.
| Contract Size | Entry Price | Exit Price | PnL |
| 1 BTC | 5,000 USD | 5,500 USD | 500 USD |
If you expect the price of BTC to fall, you can sell a BTCUSDT futures contract to go short.
| Contract Size | Entry Price | Exit Price | PnL |
| 1 BTC | 5,000 USD | 4,500 USD | 500 USD |
How to Trade Futures on XT?
- Log in to your XT account and go to the USDT-Margined or Coin-Margined Futures trading interface.
- Transfer USDT or USDC to your futures account, or transfer other tokens (e.g., BTC) to your futures account as margin.
- Choose the trading pair and select your preferred leverage.
- Choose the order type and select your order details. Click [Buy/Long] or [Sell/Short] to place your order.
How to Calculate Unrealized PnL and Return on Investment (ROI)?
Order Direction:
1 represents a long order
-1 represents a short order
USDT-Margined Futures
Using the mark price as the basis:
- Unrealized PnL = Position Size * Order Direction * (Mark Price - Entry Price)
- ROI = Unrealized PnL in USDT or USDC / Initial Margin = ((Mark Price - Entry Price) * Order Direction * Position Size) / (Position Amount * Contract Multiplier * Mark Price * IMR)
- IMR = 1 / Leverage
Using the latest price as the basis:
- Unrealized PnL = Position Size * Order Direction * (Latest Price - Entry Price)
- ROI = Unrealized PnL in USDT or USDC / Initial Margin = ((Latest Price - Entry Price) * Order Direction * Position Size) / (Position Amount * Contract Multiplier * Mark Price * IMR)
Coin-Margined Futures
Using the mark price as the basis:
- Unrealized PnL = Position Size * Contract Multiplier * Order Direction * (1 / Entry Price - 1 / Mark Price)
- ROI = Unrealized PnL * Mark Price / Abs(Position Size) * Contract Multiplier * IMR
Using the latest price as the basis:
- Unrealized PnL = Position Size * Contract Multiplier * Order Direction * (1 / Entry Price - 1 / Latest Price)
- ROI = Unrealized PnL * Mark Price / Abs(Position Size) * Contract Multiplier * IMR
Risk Warning:
Futures trading is a high-risk activity with the potential for significant gains, but also the possibility of extensive losses. Past returns do not guarantee future results, and extreme price fluctuations may lead to the liquidation of your entire margin balance. The information provided here should not be considered financial or investment advice from XT. All trading strategies are decided by you and carried out at your own risk. XT is not responsible for any losses that may result from trading futures. For responsible trading practices, please refer to the XT Futures User Service Agreement.