The difference between spot trading and futures trading lies in the timing of asset delivery. In spot trading, the financial asset or currency is delivered to the buyer immediately, while in futures trading, delivery is made on a specified future date.
Spot Trading:
Immediate Delivery:
Financial assets or cryptocurrencies are bought and sold and delivered immediately to the buyer.
Ownership:
The buyer directly owns the asset after completing the transaction.
Leverage:
Spot trading is usually done without leverage, or with limited leverage.
Risks:
Considered less risky than futures trading.
Usage:
Suitable for investors who wish to own assets directly and prefer short-term trading.
Futures Trading:
Future Delivery:
Contracts are bought and sold that involve the delivery of the asset on a specified future date.
Ownership:
The buyer does not own the actual asset until the delivery date, and can close the trade before that.
Leverage:
Futures trading often involves the use of leverage, which can increase potential profits and losses.
Risks:
Considered more risky than spot trading due to the possibility of using leverage.
Usage:
Used to hedge against future price fluctuations or to speculate on price movements without actually owning the asset.
In summary: spot trading is the buying and selling of assets for immediate delivery, while futures trading is the buying and selling of contracts for future delivery with the possibility of using leverage.
