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What is Future contracts?

A futures contract is a legal agreement to buy or sell something like a commodity or financial instrument at a predetermined price at a specified time in the future. Futures market is different from the traditional spot market. You cannot directly purchase or sell the asset in futures market. You are only allowed to trade a contract to represent those assets and the it will be settled at a future date which usually means the delivery date.

The original use of futures contracts was to mitigate the risk of price or exchange rate movements by allowing parties to fix prices or rates in advance for future transactions. Therefore, traders can use future contracts to do hedging and risk management. Futures contracts offer opportunities for speculation that traders can bet against an asset’s performance even if they don’t have it. For instance, buying a contract to obtain a "long position" means bullish; while selling a contract to obtain a "short position" means bearish. If you buy a contract, it means that you agree to purchase the underlying asset on the settlement date, and it’s called a "long position.” On the contrary, if you sell the contract, it means that you agree to assume the responsibility of the underlying asset to be sold in the future, and it’s called a "short position.” In addition, traders also can use leverage to enter positions to get more profits(if the prediction is correct).  

Perpetual contracts

Perpetual contracts are very similar to futures contracts. The different between perpetual and futures contracts is that perpetual contracts have no expiration date or settlement time. Traders can hold or traded for an indefinite amount of time as long as the margin is sufficient. Perpetual contracts are more suitable for long-term investment, and can save the handling fee incurred by delivery. In addition, like a futures contract, trader can use leverage and do not exchange the underlying assets on the spot, but they don’t need to worry about any approaching expiry date or contango structure upon future roll-over. Therefore, perpetual contract trading is more flexible and more active than future contracts, which is currently the main contract type promoted by cryptocurrency exchanges.

In cryptocurrency contract transactions, an open position means any established or entered trade that is yet to be closed with an opposing trade. Closing a position refers to executing a contract  transaction that is the exact opposite of an open position, which also means that selling those bought contracts or buying back already sold contracts.  A position is a contract that has not been closed after the position has been opened. In the contract market, a position usually refers to the intention of the purchase and sale contract.

In addition, you can use leverage to amplify your account balance. Leverage can make traders obtain greater profits, but it also magnifies the trading risk. Therefore, you need to deposit a certain percentage of funds into the contract account  on trading platform as a guarantee, which is the "margin".