Spot Trading:
Immediate Delivery:
Traders buy or sell assets at the current market price, and the transaction is settled immediately.
No Leverage:
Spot trading does not use leverage, so the risk is limited to the actual capital invested.
Lower Risk:
Generally considered less risky than futures trading due to the lack of leverage and the immediate nature of the transaction.
Simpler to Understand:
Spot trading is generally easier to understand and less complex than futures trading, making it a good option for beginners.
Long-term Investment:
Spot trading is suitable for long-term investments, where traders can hold positions indefinitely.
Future Trading:
Future Delivery:
Traders agree on a price and delivery date for a future transaction, often months in advance.
Leverage:
Futures trading uses leverage, allowing traders to control larger positions with smaller amounts of capital.
Higher Potential Returns:
The use of leverage can amplify gains, leading to higher potential returns.
Increased Risk:
The use of leverage also increases the risk of losses, as gains and losses are magnified.
Short to Medium-term Trading:
Futures trading is more suited for short to medium-term trading strategies, with contracts having expiration dates.
