leveragetrading

In cryptocurrency and traditional finance, you’ll constantly hear the terms spot trading, futures, and perps. They all let you trade assets, but they work very differently and choosing the wrong one can dramatically affect your risk, cost, and profit potential.

Spot Trading – The Simplest Way to Buy and Sell

Spot trading is just buying or selling an asset at the current market price the “spot” price for immediate delivery.

Key features:
- You actually own the asset for example you buy 1 BTC you own 1 BTC in your wallet or exchange account.
- Settlement is instant T+0 or T+2 in traditional markets.
- No leverage by default you can only trade with the money you have, unless the exchange offers margin spot trading.
- No funding rates or expiration dates.
- Profits or losses come only from price movement.

For Example:
You buy 1 BTC at $60k on Binance spot market. If BTC goes to $70k, you can sell and make $10k profit. If it drops to $50k you lose $10k.

Best for: Beginners, long-term holders, and anyone who actually wants to own the cryptocurrency.

Futures Trading – Betting on Future Prices with an Expiration Date

A futures contract is an agreement to buy or sell an asset at a predetermined price on a specific date in the future.

Key features in crypto:
- Usually leveraged 5x, 10x, 20x, up to 125x on some exchanges.
- Has an expiration date (lweekly, bi-weekly, quarterly — For example “BTC USD 27 DEC 24”.
- You do NOT own the underlying asset.
- Settled in cash USDT or coin-margined or sometimes physically delivered rare in crypto.
- At expiry, the contract settles and closes.

For Example:
You open a 10x long BTC quarterly futures contract at $60k with $6k margin.
- If BTC reaches $66k at expiry you make $60k profit 10x leveraged.
- If BTC drops to $54k you lose your entire $6k liquidation may happen earlier.

Best for: Traders who have a specific time horizon or want to hedge with a defined end date.

Perps – Futures Without Expiry

Perpetual contracts are basically futures contracts with no expiration date, invented by BitMEX in 2016 and now the dominant instrument in crypto derivatives.

Key features:
- No expiry you can hold the position forever as long as you don’t get liquidated.
- High leverage commonly up to 100x to 200x.
- Uses a “funding rate” mechanism to keep the perp price anchored to the spot price.
- Every 8 hours or 4 hours on some exchanges, long positions pay short positions or vice versa depending on whether the perp is trading above or below spot.
- You do NOT own the asset.

For Example:
You open a 50x long BTC perp at $60k.
BTC pumps to $70k you make $500k unrealized profit.
But if the funding rate is positive and high say 0.05% every 8 hours, you’ll be paying shorts a small amount continuously just to keep the position open.

Best for: Day traders, swing traders, and anyone who wants leveraged exposure without worrying about rolling contracts.

Quick TL;DR Summary
- Spot = actually buying the coin, no leverage, no expiry, simplest and safest.
- Futures = leveraged bet with an expiration date.
- Perps = leveraged bet with no expiration, kept in line by funding payments.

Choose spot if you’re new or want to own crypto.
Choose perps or futures only when you fully understand leverage, liquidation, and funding rates because that’s where most traders get wrecked.

Happy trading, and always start small while you’re learning👍
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