To understand the future market, it is essential to understand some basics. The future market is a hypothetical market where you can double, triple, or even 100X your money. For example, if someone has $100, they can convert it into $10,000. Or, the exchange provides you with a loan. But its risk and reward also increase manifold.
If you do 100X, then a 1% increase or decrease in your amount will make a big difference. If it increases by 1%, your $100 will become $200, and similarly, if it decreases by 1%, your amount will be liquidated.
In this future market, it is essential to understand leverage. You must have noticed that the trading fees in the future market are very minor; the main reason is to trap you in the future market and make you an addict.
Another essential thing is the funding fee, which the exchange provides to you, sometimes in favor of long position holders and sometimes in favor of short position holders. When the market is bullish, and you take a short trade, you will receive a funding fee; similarly, if the market is bearish and you take a long position, you will receive a funding fee. This is an attempt to lure or persuade traders.
What is the funding fee? It is the price gap between the spot and future markets to reduce it. You must have noticed that the price of BTC in the spot is different from the future market.
These are some basics about the future market that you should know.
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