#SpotVSFuturesStrategy refers to the different ways that traders and investors approach financial markets, especially in assets like cryptocurrencies, commodities, or stock indices. Each approach has its own characteristics, advantages, and disadvantages, making them suitable for different objectives and risk profiles.
To understand this strategy, it is essential to comprehend what spot trading and futures trading are:
Spot Trading (Cash Market)
Definition: Spot trading involves the buying or selling of a financial asset (for example, Bitcoin, stocks, gold) at its current market price for immediate delivery and settlement. When you buy in the spot market, you acquire direct ownership of the asset.
Characteristics:
Direct ownership: You own the underlying asset (for example, if you buy BTC in spot, you have real BTC in your wallet).
Immediate settlement: Transactions are executed "on the spot," meaning that the delivery of the asset and payment are made almost instantly.
No leverage (generally): Unlike futures, spot trading typically does not allow the use of leverage, meaning you can only trade with the capital you possess. This limits potential gains and losses to the difference between the buying and selling price.
Simplicity: It is the most straightforward and easy-to-understand approach for beginners.