Getting into crypto without a clear understanding of Spot and Futures can lead to heavy losses. I see many beginners often confuse these two trading methods, so today I want to share some things I’ve learned.

What is spot trading? Simply put, it’s when you buy actual coins/tokens, which are truly owned by you. You only make a profit when the price goes up. For example, if I spend 20 million VND to buy Bitcoin, I now own BTC worth 20 million VND. When the price rises to 30 million VND, I can sell for a 10 million VND profit. But if the price drops to 10 million VND and I sell, I lose 10 million VND. The advantage of spot trading is that if you don’t sell, the coins stay in your wallet and you don’t pay maintenance fees. You can wait until the price recovers to the original level or higher before selling.

So what is spot trading compared to Futures? Futures are completely different. It’s trading based on predicting price movements through futures contracts. The good thing is you can make money whether the price goes up or down. But the risk is much higher because of leverage.

For a specific example, a Futures ETH/USDT contract is priced at $1,000, and the exchange allows 10x leverage. You only need $100 to open a position. If the price increases by 10%, your profit doubles, meaning 20% of your initial capital. But if the price drops by 10%, you lose the entire $100. That’s the power and danger of leverage.

In summary, when asked what spot trading is, it’s owning the actual coins, while Futures involve trading contracts without owning the coins.

Besides this fundamental difference, the two methods also have many other characteristics. Both spot and futures aim to buy and sell assets to profit from price differences. Both rely on the underlying market of digital assets, where the price determines the trading value. The trading times are similar, often during market hours. Both carry risks from price volatility. And both types of trading are conducted through crypto exchanges.

But remember, Futures are not for everyone. They require a deeper understanding of the market, good risk management skills, and a strong mindset. If you’re just starting out, begin with spot trading to understand how the market works, then consider moving into Futures later. Spot trading is basic, but it’s the foundation for understanding other trading methods.

If you have any questions, feel free to ask, I’m ready to discuss!