#TradingTypes101

1. Spot Trading

In spot trading, you directly buy and own the underlying asset (e.g., cryptocurrency, stock, commodity) for immediate delivery. You have full control over the asset. Transactions are settled "on the spot" or very quickly at the current market price (the "spot price"). Generally, there is no leverage in spot trading. You can only trade with the capital you possess. Your potential profit or loss is limited to the amount you invest.

2. Margin Trading

You don't fully own the asset outright. Instead, you borrow funds from a broker or exchange to increase your trading capital. The assets purchased serve as collateral for the loan. Margin trading involves leverage, meaning you can control a larger position with a smaller initial deposit (your "margin"). This amplifies both potential gains and losses. For example, with 5x leverage, a $100 investment allows you to control a $500 position. Significantly higher risk than spot trading.

3. Futures Trading

You do not directly own the underlying asset. Instead, you trade a "futures contract," which is an agreement to buy or sell an asset at a predetermined price on a specific future date. Settlement occurs at a future date (the contract's expiration date), either by physical delivery of the asset (less common for most traders) or, more often, by cash settlement of the profit or loss.