#SpotVSFuturesStrategy
Spot Trading:
Definition: Buying or selling cryptocurrencies at the current market price for immediate settlement.
Key Features:
Ownership: You own the actual crypto asset.No leverage: Typically involves no borrowing, reducing risk.
Simplicity: Straightforward buy/sell transactions.
Use Case: Ideal for long-term holding or quick trades to capitalize on short-term price movements.
Risk: Limited to market volatility; no expiration date.
Futures Trading:Definition: Agreeing to buy or sell a crypto asset at a predetermined price on a future date via a contract.
Key Features:
Leverage: Allows trading with borrowed funds, amplifying potential gains/losses.
Contracts: Standardized agreements with expiration dates.
Hedging/Speculation: Used to hedge against price changes or speculate on future prices.
Complexity: Requires understanding margin, liquidation, and funding rates.
Risk: Higher due to leverage and potential for significant losses beyond initial investment.
Comparison:
Risk: Spot is lower risk; futures are high risk due to leverage.
Capital: Spot requires full payment; futures allow trading with less capital via margin.
Strategy: Spot suits beginners or HODLers; futures suit experienced traders for short-term gains or hedging.
Time Horizon: Spot is flexible; futures are time-bound due to contract expirations.