Many newcomers in the crypto space enter the market and see various trading methods on the interface: spot, leverage, contracts, and can't distinguish between them.
The key to understanding trading types is to clarify:
You need to consider 'what to buy' + 'what to bet on' + 'how much risk you can bear.'
💚 1. Spot trading: Buying coins = Holding coins.
This is the simplest model. You spend 1,000 USDT to buy ETH, so this part of the asset directly belongs to you, just like buying gold at the supermarket and putting it in your own safe.
For example:
You bought one ETH at a price of 2,000 USDT.
After two months, it rises to 3,000 USDT. You profit from the increase in the coin price itself, without involving leverage.
The same applies to losses; if it drops to 1,500 USDT, your loss is 500 USDT, unless you sell it actively, it will remain in your wallet.
✅ Who is it suitable for?
• Beginners or those who are optimistic about a certain coin in the long term.
• Those who want to participate in project ecosystems (such as staking, airdrops, holding votes).
Bee tips:
Spot trading is the most stable and recommended way to start.
💚 2. Leverage trading: Borrow some funds to amplify returns (and risks).
On Binance, you can borrow up to 10 times the funds through isolated margin leverage (there may be restrictions depending on different trading pairs, generally common mainstream coins allow 3-5x leverage).
So if you borrow 5x leverage, for example, if you have 100 USDT, you borrow 400, making a total position of 500 USDT.
The logic is: if it rises by 1%, you earn 5% return; if it drops by 1%, you also lose 5%.
Let’s take another example:
You have 500 USDT in your account, but you are very confident in SOL. You can open a position of 1,500 USDT with 3x leverage.
If SOL rises from 100 to 110, the coin price has increased by 10%, but your actual return is 30%.
Conversely, if it drops to 90, your loss will also be magnified to 30%. If it drops even faster, you might get liquidated—meaning the system directly sells your holdings to avoid debt.
✅ Who is it suitable for?
• Intermediate users who have judgment on the market but limited capital.
• Those who want to quickly increase their positions but don't want to touch the spot base.
Bee tips:
Although leverage can amplify returns, it also amplifies risks simultaneously. Beginners should keep it within 2x. Set stop-loss to avoid liquidation risk!
💚 3. Contract trading: betting on price fluctuations without buying coins.
Contracts are the most controversial but also the most exhilarating type of trading. You don't actually own the coins; instead, you bet in the contract market on whether 'it will rise' or 'it will fall.'
You can go long (bullish) or go short (bearish), and you can use leverage of up to 125 times (Binance recommends below 10 times).
Going long: You think the price will rise, so you open a long position and make money when it goes up.
Going short: You think the price will fall, so you open a short position and make money when it goes down.
For example:
Assuming the current price of BTC is $60,000.
You judge that it will rise next, so you use 100 USDT to open a long position with 10x leverage (which means controlling a position of 1,000 USDT).
If BTC rises to $66,000 (a 10% increase), you made 100 USDT from this trade, which is a double.
But if BTC drops to $54,000 (a 10% drop), your account will be directly wiped out, and you will be liquidated.
Your capital is 100 USDT; although you control a contract of 1,000 USDT, the system only allows you to lose that 100 USDT. If it goes lower, you will be liquidated.
This is the cost of high leverage—seemingly 'amplifying the opportunity by 10 times,' but in fact, it also amplifies the risk by 10 times.
The charm of contracts lies in: small funds triggering large fluctuations.
Its risks are very high: extreme volatility + high leverage + fees + emotional fluctuations = liquidation machine.
✅ Who is it suitable for?
• Familiarize yourself with market rhythms, have a clear strategy and risk management.
• Those who are good at capturing short-term emotions and event-driven opportunities.
Bee tips:
Beginners be very careful! Initially, it is recommended to use a demo account or try small amounts (0.5-1x leverage) with every trade carrying a stop-loss. Set it up before you start!
Three tips for beginners:
1. Start with spot trading, don’t rush to play with leverage and contracts.
You need to develop a feel for 'risk tolerance' and 'trading rhythm' before challenging higher levels.
2. Trade with money you can afford.
Especially for contracts, do not use living expenses to trade; that’s called gambling, not investing.
3. Understand the platform mechanism; don’t take shortcuts.
What is 'liquidation price'? 'Funding rate'? 'Liquidation logic'? Detailed information can be found on Binance's official website and academy; spend an hour understanding it to save you ten thousand bucks.
What is your most commonly used trading method? Have you ever fallen into a trap?