Spot vs Futures Strategy
First: What is Spot Trading?
Spot trading means buying or selling a financial asset (such as currencies, gold, or cryptocurrencies) at the current market price, with the asset being delivered immediately or within a maximum of two days.
Spot Advantages:
- Direct ownership: You buy the asset and own it physically (for example: you buy Bitcoin and store it in your wallet).
- Simplicity and transparency: There are no contracts or expiration dates.
- Lower risks: There is no margin trading, hence no risk of liquidation.
- Ideal for long-term investors.
Spot Disadvantages:
- No leverage: You need a large capital to achieve significant profits.
- Slower profits: Since you are not using borrowed funds, the return is limited by the size of your capital.
Second: What is Futures Trading?
Futures Advantages:
- Leverage: You can control large positions using a small part of your capital.
- Profit opportunities in both directions: You can profit whether the price rises or falls (Long or Short).
- Strong hedging tool: Used by companies to stabilize future prices of raw materials or currencies.
- High liquidity: Especially in large markets like oil or Bitcoin futures.
Futures Disadvantages:
- High risks: Due to leverage, you can lose more than your capital.
- Expiration date: You must close or renew (roll-over) the contract before it expires.
- Daily financing fees: If you hold the position for a long time