What are the differences between Spot and Futures markets? What is Long and Short? How does Futures market work?

Spot market is like the classical traditional trading market. You can buy any asset from any price. Then you can sell it at any price, if you have that asset. We highlighted “if you have”, because it will differentiate in Futures.

In Futures market, you don’t trade assets but contracts. You can sell even you don’t have it. That’s called short position. If you think the price will drop, you Short (sell) it. If you think the price will go up, you Long (buy) it.

Briefly, futures exchanges works by this method:

You can open positions up to your deposit amount multiplied by the leverage. For an example if your deposit worhs $1000 and the leverage is 50x, that means you can open positions up to size of $50.000. If your risk exceeds your collateral, your whole investment becomes liquidated. That is the risk of the Futures market. If you succeed to keep the margin ratio low, you can earn much more than you can do in Spot. Use at your own risk.