New traders often get confused between Spot and Futures markets. Here is a simple breakdown of the differences.
Spot Trading
In spot trading, you are buying the actual asset. If you buy 1 BTC, you own 1 BTC. You can withdraw it to your wallet.
- Pros: You own the asset, no liquidation risk (unless price goes to 0).
- Cons: Can only profit if price goes up.
Futures Trading
In futures trading, you are betting on the future price of an asset. You do not own the underlying coin.
- Pros: Can use leverage (borrowed money), can profit from price drops (Shorting).
- Cons: High risk of liquidation (losing entire margin).
Conclusion
Beginners should always start with Spot trading. Futures trading requires experience and strict risk management.