The difference between spot and futures trading strategy. #SpotVSFuturesStrategy
📍 Spot Trading
Definition: Buying or selling a financial instrument (like crypto, stocks, or commodities) for immediate delivery.
Settlement: Usually happens immediately or within a couple of days.
Ownership: You own the actual asset (e.g., BTC, ETH, gold, etc.) once the trade is complete.
Example: You buy 1 BTC on a crypto exchange today — you now own that BTC.
Pros:
Simple and easy to understand.
You get the asset right away.
No expiry or margin requirements.
Cons:
Tied to the current market price.
Can't profit easily from falling markets (unless using shorting strategies).
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📈 Futures Trading
Definition: An agreement to buy or sell an asset at a predetermined price at a future date.
Settlement: Happens on the contract’s expiration date, unless you close it earlier.
Ownership: You don’t own the asset — you're trading a contract based on the price of the asset.
Example: You enter a futures contract to buy 1 BTC at $60,000 in a month, expecting the price to rise.
Pros:
Can profit from both rising and falling markets (long or short).
Often uses leverage — small capital controls a larger position.
No need to hold the asset itself (good for commodities or crypto).
Cons:
Leverage increases risk — losses can exceed initial capital.
Contracts expire — timing matters.
More complex and requires more knowledge.