Spot or Futures: Which Crypto Trading Method Suits You Better? (2024)

FAQs

Spot or Futures: Which Crypto Trading Method Suits You Better? ›

Spot trading is better for long-term investing because you are buying and holding the actual asset without borrowing funds or using leverage. Futures trading is better for short-term speculation, leverage, hedging, and shorting.

Trading futures also usually carry lower fees than trading an asset's spot price. Another benefit of this trading method is the ability to take advantage of future events. For example, the Bitcoin halving or any type of network consensus or protocol change that could predictably affect the price.

Neither market inherently offers more profitability than the other. However, here are some factors to consider: Trading Capital: Spot trading, especially with high leverage, might require less initial capital than futures trading. This makes it accessible to retail traders.

Speculators Can Make Fast Money. An investor with good judgment can make quick money in futures because essentially they are trading with 10 times as much exposure as with normal stocks. Also, prices in the future markets tend to move faster than in the cash or spot markets.

Spot trading is better suited for those who want to buy or sell cryptocurrencies at the current market price. In contrast, futures trading is better suited for those who want to speculate on future price movements or hedge against potential losses.

It is possible to make $100 per day, but there is no guarantee or specific technique you can use to ensure it happens. Cryptocurrency trading, lending, staking, and investing all come with significant risks because it is such a volatile and unpredictable asset.

Intraday trading is all about precise timing and market understanding. A good intraday trading strategy works only after technical analysis, practical execution, using indicators and proper risk management. So here we will intraday trading strategies. This strategy can be used by beginners to start trading.

Is spot safer than futures? ›

Simple to use: Spot trading is relatively straightforward, especially for those new to trading. Less risky: It's less risky than margin and futures trading, which means your losses are limited to the capital you put in.

It indicates that demand is higher than supply in the short term, causing futures prices to rise. Futures prices rise above spot prices because investors become comfortable paying more for the future assets. However, commodity and volatility funds are structured to buy short-term futures.

The defining feature of day trading is that traders do not hold positions overnight; instead, they seek to profit from short-term price movements occurring during the trading session.It can be considered one of the most profitable trading methods available to investors.

In spot trading, a trader buys a crypto asset and holds it to sell later at an increased price. However, profit isn't always guaranteed and is limited to the price difference between buying and selling crypto tokens.

To start, let's focus on two key strategies that are considered a good starting point for beginners and should make up the majority of your portfolio - HODL and Dollar Cost Averaging (DCA). They are straightforward to implement and are considered relatively low risk.

Safer Than Owning Crypto: Bitcoin futures contracts are relatively safer for dabbling in Bitcoin without getting burnt because futures contracts have positions and price limits that enable you to curtail your risk exposure to the asset class.

Risk Management: Bitcoin futures allow investors to hedge against price volatility, reducing the risk associated with holding Bitcoin. Speculation: Traders can profit from both rising and falling Bitcoin prices by taking long (buying) or short (selling) positions in futures contracts.

The Bottom Line. As an investment tool, futures contracts offer the advantage of price speculation and risk mitigation against potential market downturns. However, they come with some drawbacks. Taking a contrary position when hedging could lead to additional losses if market predictions are off.

Yes, it is possible to lose more money than you initially invested in futures trading. This is because futures contracts are leveraged, which means you can control a large position with a relatively small amount of investment upfront. 9 While leverage can amplify your gains, it can also magnify your losses.