#TradingTypes101 1. Spot Trading
Definition: Buying or selling an asset (e.g., stocks, crypto, commodities) for immediate delivery and ownership.
Ownership: Yes, you own the asset.
Leverage: No leverage you trade only what you have.
Settlement: Instant or near-instant.
Risk: Lower risk since there's no borrowing.
Example: Buying 1 BTC at $50,000 — you pay $50,000 and receive 1 BTC.
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2. Margin Trading
Definition: Borrowing money or assets from a broker/exchange to trade with more than your own capital.
Ownership: Yes, but with borrowed funds.
Leverage: Yes (e.g., 2x, 5x, or more).
Settlement: Immediate, but you must repay borrowed funds.
Risk: Higher — losses can exceed your initial investment and lead to liquidation.
Example: You have $1,000, use 5x leverage to control $5,000 worth of BTC. If price drops significantly, your position can be liquidated.
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3. Futures Trading
Definition: Trading contracts to buy or sell an asset at a predetermined price and date in the future.
Ownership: No ownership of the asset — you're trading contracts.
Leverage: High leverage is common (e.g., 10x, 50x).
Settlement: On contract expiration or closed early (can be perpetual).
Risk: Very high — potential for big gains or losses.
Example: You enter a futures contract to buy BTC at $55,000 next month. If BTC rises to $60,000, you profit; if it drops, you lose.
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🧠 Summary Table:
Feature Spot Trading Margin Trading Futures Trading
Ownership Yes Yes (with debt) No
Leverage No Yes Yes
Risk Level Low to Moderate High Very High
Timeframe Immediate Immediate Future (or perpetual)
Used By Investors Short-term traders Speculators, hedgers
