#TradingTypes101 Difference between future trading margin and spot🔥🔥🔥🔥🔥🔥
The difference between futures trading margin and spot trading lies primarily in the way assets are bought and the capital requirements involved. Here's a breakdown:
Definition: Buying or selling an asset (e.g., a stock or cryptocurrency) for immediate delivery and payment.
Ownership: You own the asset outright once purchased.
Capital Requirement: You must pay the full value of the asset up front.
Example: Buying 1 $BTC at $65,000 requires $65,000 in cash.
Leverage: Typically no leverage (unless on margin in some platforms).
Risk: Limited to the asset's price movement and your full investment.
Definition: A contract to buy or sell an asset at a later date at a predetermined price.
Ownership: You don’t own the asset—you're speculating on its future price.
Capital Requirement: Requires only a margin deposit (a fraction of the full contract value).
Types of Margin:
Initial Margin: The minimum amount to open a position.
Maintenance Margin: The minimum balance to keep the position open.
Example: To control a $65,000 $BTC futures contract, you might only need $3,000–$6,500 (5–10%).
#Leverage: Offers high leverage, increasing both potential gains and risks.
#Risk Higher—due to leverage and the possibility of margin calls or liquidation if the market moves against you.