What Are Spot, Margin, and Futures Trading?
Spot Trading: Buy or sell cryptocurrencies at the current market price, with assets credited immediately after the transaction is filled. It is simple to operate and carries relatively low risk, but potential gains are limited to market price movements.
Margin Trading: Based on spot trading, margin trading allows investors to borrow funds to amplify their capital, increasing potential returns while also taking on higher exposure to market volatility.
Futures Trading: Investors speculate or hedge by trading derivative contracts linked to cryptocurrency prices. They can freely choose long or short positions and apply leverage. This allows for high capital efficiency but also comes with significant risks.
Differences Between Spot, Margin, and Futures Trading
| Features | Spot Trading | Margin Trading | Futures Trading |
|---|---|---|---|
| Underlying Asset | Actual cryptocurrencies | Actual cryptocurrencies (with borrowed funds) | Cryptocurrency contracts |
| Asset Ownership | Owns the underlying asset | Owns the underlying asset | Does not own the underlying asset, and only holds futures positions |
| Leverage | No leverage | Low leverage (e.g., 3–5x) | High Leverage (up to 125x) |
| Trading Method | Trading with full payment | Trading with full payment + borrowed funds | Margin-based trading |
| Risk & Return | Lower risk and returns that fluctuate with market price | Moderate risk and returns | High risk and potentially high returns |
| Strategy Flexibility | Simple (buy and hold) | Moderate (short-term leveraged gains) | Diverse (long/short/hedging) |
Scenario Comparison
- Current BTC Price: 100,000 USDT
- Principal: 10,000 USDT
Spot Trading
- Operation : Use 10,000 USDT to buy 0.1 BTC.
- Result :
- If BTC price rises to 110,000 USDT (+10%), the profit is 1,000 USDT.
- If BTC price falls to 90,000 USDT (-10%), the loss is 1,000 USDT.
- Feature : Profit and loss move 1:1 with price changes, no leverage risk.
Margin Trading (3x)
- Operation : Borrow 20,000 USDT, and invest a principal of 30,000 USDT (10,000 USDT × 3) to buy 0.3 BTC.
- Result :
- If BTC price rises to 110,000 USDT (+10%), the profit is 3,000 USDT (0.3 BTC × 10,000 USDT).
- If BTC price falls to 70,000 USDT (-30%), triggering liquidation, all margin will be wiped out.
- The liquidation price here is for reference only. Actual liquidation is determined by the margin level.
- Feature : Gains/losses amplified 3×, carries liquidation risk.
Futures Trading (Perpetual Futures, 10x)
- Operation : Use 10,000 USDT as margin to open a 10× long BTC contract (position value: 100,000 USDT).
- Result :
- If BTC price rises to 110,000 USDT (+10%), the profit is 10,000 USDT.
- If BTC price falls to 90,400 USDT (-9.6%), triggering liquidation, the entire margin will be wiped out.
- The liquidation price here is for reference only. Actual liquidation is determined by the MMR.
- Feature : Supports bidirectional trading (long/short) and hedging.
