SPOT TRADING VS FUTURE TRADING
On cryptocurrency exchanges, traders have the option to purchase cryptocurrencies through spot trading as well as perhaps increase their earnings by trading futures with up to 500x leverage. What distinguishes futures trading from spot trade, then? What else separates the two types of trading, outside the potential for varying profits for traders? You ought to be able to comprehend the fundamentals of both spot and futures trading after reading this article.
DIFFERENT INVESTMENT TARGETS
Traders can purchase and sell cryptocurrencies, such as 10 BTC or 1 ETH, when spot trading on exchanges. Traders who buy cryptocurrencies through spot trading become the owners of those assets and are free to move them between blockchain networks.
On the other hand, traders purchase and sell perpetual contracts while trading futures. When you buy 1,200 cont. of BTC/USDT, for instance, this part of your assets cannot and will not be moved via any blockchain network.
VARIOUS TYPES OF TRADING
Generally speaking, only spot trading pairs listed on Exchanges have corresponding futures trading pairs. However, not all spot trading pairs have corresponding futures trading pairs. Also, not all futures trading pairs support 500x leverage.
Methods of Earning
Because spot trading is a one-way market, traders are only able to go long and are unable to sell a position. As soon as a position is purchased, it can be sold. On the other hand, traders can hold both long and short positions in the two-sided market that is the profit mechanism for futures trading. Once a position has been opened, it can be closed instantly.
Leverage
Leverage is neither necessary nor supported in spot trading. The initial margin in futures trading represents the leverage. With a small initial margin, traders can hold a large position value while trading futures, boosting the possible return on investment.
VARIOUS ORDER PLACEMENT TECHNIQUES
Limit, market, stop-limit, and OCO (One-Cancels-the-Other) are the four order types available on the spot trading interface.
A wider variety of order placement choices are available on the futures trading interface. Limit orders, market orders, trigger orders, trailing stop orders, and post-only orders are the five order types from which you can choose. You can also make use of features like Flash Close, Close Short/Reverse, and adding TP/SL.
RISK REMINDER
Investments should be made carefully because trading entails risks. This article’s content is not intended to be investment advice. Please base your investing choices on your own risk tolerance, financial status, and investment goals.