(Which type of trading is suitable for you? The key lies in these 5 dimensions) Take good notes; it will be tested/
🔍 Core Differences Among Three Main Trading Types
| Spot Trading | Leverage Trading | Contract Trading |
| Funds Usage | Full Payment | Leveraged Position (2-10x) | Margin Trading (5-125x) |
| Asset Ownership | Instant settlement, holding physical | Borrowed assets require interest repayment | Only contract rights, no physical |
| Direction Selection | Only Long | Both Long and Short | Both Long and Short + Flexible Leverage |
| Risk Level | Low (only principal risk) | Medium (potential liquidation) | High (high leverage liquidation risk) |
| Applicable Scenarios | Long-term investment/small trades | Medium to short-term trend trading | High-frequency/arbitrage/hedging |
▶ Simple Metaphor:
- Spot: Buying a house with full payment (actually owning)
- Leverage: Borrowing to buy a house (both profits and debts are magnified)
- Contracts: Speculating on property options (betting on price fluctuations without actually buying)
🚀 When to use which type of trading?
✅ Spot Trading: Suitable for…
- Long-term Holding (e.g., dollar-cost averaging BTC, ETH)
- Beginner Entry (no leverage risk)
- Small trades (to avoid contract fee losses)
Strategy Example:
Buy BTC spot in batches with USDT and store in a cold wallet 6 months before Bitcoin halving.
✅ Leverage Trading: Suitable for…
- Trend Market Conditions (e.g., 3-5x long in early bull markets)
- Arbitrage Opportunities (utilizing borrowing rate differences)
- Hedge Spot (e.g., borrowing coins to short hedge position risks)
Strategy Example:
Discovering a trading platform where the ETH funding rate remains negative, borrowing ETH to short at 3x leverage while buying ETH spot to hedge.
✅ Contract Trading: Suitable for…
- Volatile Market Conditions (e.g., before and after major news events)
- Quantitative Strategies (Grid Trading, Inter-Period Arbitrage)
- Extreme Market Conditions (rapid short waterfall market)
Strategy Example:
Before the Federal Reserve raises interest rates, open a 20x short position on BTC perpetual contracts, setting a 5% stop loss and 10% take profit.
⚠️ Risk Comparison and Defense Strategies
| Risk Type | Spot | Leverage | Contract | Response Plan |
| Price Volatility | Low | Medium | High | Leverage ≤5x, Contract ≤10x |
| Liquidation Risk | None | Present | Extremely High | Set stop loss ≥ 50% of margin |
| Funding Rate | None | Low | Significant | Avoid periods with rates >0.1% |
| Liquidity Risk | Low | Medium | High | Only trade mainstream pairs |
Lessons Learned:
During the 2022 #LUNA crash, traders using 100x contracts nearly all got liquidated, while spot holders at least retained some value.
Mixed Strategy Practical Case
Scenario: Expecting Bitcoin to pull back in the short term but bullish in the long term
1. Spot Layer: Retain 50% of funds to hold BTC
2. Leverage Layer: Short BTC/USDT at 3x (to hedge against short-term declines)
3. Contract Layer: Open a 5x BTC perpetual long position, setting a trigger price 10% below the spot price (preparing to bottom fish)
Effect:
- If it goes down: Leverage short position profits offset spot losses
- If it goes up: Contract long position + spot simultaneously profits
📌 Ultimate Decision
if (you are a beginner or long-term investor) → choose spot
else if (can tolerate medium risk and has trend judgment ability) → choose leverage
else if (has high-frequency experience or needs to hedge) → choose contracts
#交易类型入门 My Choice:
- Main Bull Market Wave: Spot + moderate leverage long position
- Bear Market Rebound Period: Short-term contract short position
- Sideways Consolidation Period: Spot Grid + Contract Arbitrage
What type of trading have you lost money on? How did you adjust your strategy afterward?