#SpotVSFuturesStrategy

Key Points of Spot vs Futures Trading

Definition and Mechanics:

Spot Trading: Buying or selling an asset (stocks, commodities, cryptocurrencies) at the current market price with immediate delivery and settlement (usually within a few days). You fully own the asset.

Futures Trading: Contracts to buy or sell an asset at a predetermined price in the future. Traders do not own the asset immediately but speculate or hedge against price changes, often using leverage.

Risk and Leverage:

Spot: Lower risk as there is no leverage; losses are limited to the decrease in the asset's price. Full capital is required. Suitable for cautious or beginner traders.

Futures: High risk due to leverage, which increases both profits and losses. Margin calls and liquidation are possible. Suitable for experienced traders who are prepared for volatility.

Investment Horizon:

Spot: Suitable for short-term trades (e.g., day trading) or long-term holding (buy and hold strategy). No expiration dates.

Futures: Better for short- and medium-term strategies due to the expiration of contracts.