Learn about it in one article: The difference between currency contract and spot trading and how to play it

Contract trading and spot trading are the two main trading methods in the cryptocurrency market. The article will delve into the differences between these two trading methods, including trading forms, trading objects, trading mechanisms, risks and returns, etc. In addition, the gameplay and strategies of contract trading and spot trading will also be introduced to help readers understand how to use these two trading methods to make profits in the cryptocurrency market.

The difference and gameplay between currency circle contracts and spot trading

Difference

1. Transaction object:

• Contract trading: With futures contracts as the object, the contract itself is traded, not the underlying asset.
• Spot trading: Taking physical assets as the subject matter, the transaction is the underlying asset itself, such as Bitcoin, Ethereum, etc.

2. Trading mechanism:

• Contract trading: The use of leverage trading mechanism can amplify trading returns and risks.
• Spot trading: Use a point-to-point trading mechanism to directly buy and sell underlying assets.

3. Settlement method:

• Contract transaction: When the contract expires, settlement will be based on the price of the underlying asset, and profits and losses will be settled in cash. .
• Spot trading: Immediate settlement after the transaction is completed, and profits and losses are settled with the underlying assets.

How to play

Contract trading:

• Leverage trading: Leverage can be used to amplify trading returns and risks. For example, with 10x leverage, investing $100 can trade a $1,000 contract.
• Long and short: You can make profits when the underlying asset rises or falls, either long (buy) or short (sell).
• Risk of liquidation: Leveraged trading will amplify the risk. If the market trend is contrary to expectations, it may lead to liquidation and the loss of all principal.

Spot trading:

• Peer-to-peer trading: Buy or sell the underlying asset directly, such as placing an order to buy or sell on the exchange Out of Bitcoin.
• Hold assets: After the transaction is completed, the underlying assets held will be deposited into your own digital currency wallet.
• Buy when low and sell when high: According to market conditions, buy the underlying asset at a low price and sell at a high price to make a profit.

Suitable for the crowd

• Contract trading: Suitable for investors who are confident in judging market trends and willing to take higher risks.
• Spot trading: suitable for investors who hold underlying assets for a long time and pursue stable returns.

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