Which should I trade, futures or spots?
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Which should I trade, futures or spots?
Traders are drawn to the futures market because of leverage. Leverage makes futures trading extremely capital-efficient. The higher the leverage, the less you need to spend on a position. Spot trading is easy to understand and intuitive for most beginners. As such, it is the go-to venue for users who are new to crypto trading. However, futures trading offers strategic advantages and allows you to maximize profits. Futures trading can be lucrative if you have the proper knowledge and risk management techniques to avoid outsized losses.
Spot markets are by definition dealing with trading a real asset, while futures are by definition a Derivative, a synthetic commitment between two sides. If you hold a normal futures contract to its end you will, many times need to either buy or sell the real underlying asset, while some contracts are settled in cash according to the price of the asset at the due date of the contract. Meanwhile Perpetual Swaps, a popular offering in cryptocurrency exchanges, is a derivatives similar to a futures contract except that it never expires, simulating a spot holding.