A contract trading platform is an online system that allows users to trade financial derivatives, most commonly perpetual swaps and futures contracts, which derive their value from underlying assets like cryptocurrencies, stocks, indices, or commodities.

In contrast to spot markets, where traders purchase and hold real assets, derivatives trading is about agreeing to trade a position at a predetermined price in the future. The focus is purely on price speculation.

The foundation of contract trading is leverage.

Leverage: It gives you access to multiple-sized trades relative to your deposit. Say, with 10x leverage, a $100 margin manages a $1,000 position.

Upside: Increases potential gains.

Downside: Can quickly lead to liquidation.

Long vs. Short:

Long (Buy): Profit if price increases.

Short (Sell): Profit if price decreases.

Perpetual Swaps: The most common crypto contract. Trade continuously without settlement date, functions like spot trading but with leverage, maintains price parity via funding rate.

Futures Contracts: Include settlement periods. At expiration, the contract is settled.

Margin:

Initial Margin: The starting deposit to initiate a trade.

Maintenance Margin: Lowest collateral amount to keep a position active.

Liquidation: Forced closure when margin is insufficient.

Isolated vs. Cross Margin:

Isolated Margin: Limits risk to a single position.

Cross Margin: Links all open positions together.

Key Features of a Good Platform

When selecting a contract trading platform, look for the following:

Security & Reputation: First thing to check. Choose platforms with proven reliability. Security should include cold wallet storage, 2FA, and compliance certifications.

Liquidity & Volume: Prevents large slippage.

Range of Products: Variety of assets and contracts offered.

Trading Fees:

Maker Fee: Reward for adding liquidity.

Taker Fee: Paid for market orders.

Competitive platforms offer reduced fees for makers.

User Interface: Intuitive trading dashboard.

Leverage Options: Flexible leverage options.

Customer Support: 24/7 responsive help.
U.S. traders face restrictions. Options include Kraken Futures or Coinbase International Exchange.