#TradingTypes101
1. Spot Trading
Definition: Buying or selling an asset (e.g., Bitcoin, stocks) for immediate delivery at the current market price.
Key Features:
Ownership: You actually own the asset.
Settlement: Immediate or T+2 (in traditional markets).
Risk: Lower risk compared to futures or margin trading.
No Leverage: 1:1 (You trade what you can afford).
Example: Buying 1 BTC at $70,000 means you own 1 BTC.
✅ Best for: Beginners, long-term holders, low-risk strategies.
---
🔴 2. Futures Trading
Definition: A contract to buy/sell an asset at a future date for a predetermined price.
Key Features:
No actual ownership of the asset.
Leverage available (e.g., 10x, 20x).
Expiration date: (for standard futures); Perpetual contracts don’t expire.
Used for: Hedging, speculation.
Can short: Profit from price going down.
Example: You open a long position on ETH futures at $3,000 with 10x leverage. If price goes to $3,300, your return is amplified. If it drops, losses are also amplified.
✅ Best for: Experienced traders, hedging, speculation.
---
🟡 3. Margin Trading
Definition: Borrowing funds to increase the size of a position beyond your actual capital.
Key Features:
Leverage-based spot trading (not derivative).
You own the asset but it's funded partly by a loan.
Interest charged on borrowed funds.
Used for: Amplifying gains (and losses).
Example: You have $1,000, borrow $1,000 more, and buy $2,000 worth of ETH.
✅ Best for: Medium-risk traders who want more exposure while still owning the asset.
---
🧠 Strategic Differences: Spot vs Futures vs Margin
Feature Spot Futures Margin
Ownership Yes No Yes (but borrowed funds)
Leverage No Yes (up to 100x in crypto) Yes (usually up to 5x)
Risk Level Low High (liquidation risk) Medium (interest + margin call)
Use Case Investment, trading Speculation, hedging Amplify trades
Interest Charges No No (but funding fees may apply) Yes
Short Selling Not possible Yes Sometimes allowed
Liquidation Risk None High Medium
