Spot Trading:$BTC
* Definition: It is buying and selling the financial asset at the current market price for immediate delivery. When you buy an asset in the spot market, you own it directly.
* Ownership: You own the actual asset after purchase. You can keep it in your wallet, transfer it, or use it for other purposes (like staking in cryptocurrencies).
* Leverage: Spot trading generally does not involve the use of leverage, meaning you are only trading with the capital you have.
* Risks: Generally considered less risky compared to futures contracts, as you do not face the liquidation risks associated with leverage. The maximum loss is your invested capital.
* Objectives: Suitable for long-term investors who believe in the appreciation of the asset over time, and for beginners who wish to understand the basic market mechanisms without the complexities of leverage.
* Costs: Typically, costs are straightforward and limited to transaction fees and spreads.
2. Futures Trading:
* Definition: It is trading derivative contracts in which you commit to buying or selling an asset at a specified price on a specified future date. The actual asset is not directly owned, but speculation is made on its price change.
* Ownership: You do not own the underlying asset. Instead, you are trading a contract that represents the value of this asset.
* Leverage: Futures allow the use of leverage, meaning you can control a larger position with a smaller amount of capital. This can amplify profits but also increases risks.
* Risks: Considered much riskier than spot trading due to leverage. If the market moves against your position, you may face liquidation, meaning you could lose all your invested capital or more.
* Objectives: Suitable for experienced traders looking to profit from short-term price fluctuations, to hedge against future price movements, or to speculate on price increases (Long) or decreases (Short).
* Costs: In addition to transaction fees and spreads, futures costs may include funding fees and overnight fees if positions are held for long periods.