Newbie Must Read: A Simple Comparison of 3 Trading Methods

Ser_APY_2000 · 2025-11-22T15:28:08+00:00

The article introduces three trading methods: spot trading, spot margin trading, and futures trading. Spot trading is the safest method, suitable for newbies; spot margin trading allows borrowing to amplify funds, but carries higher risks; futures trading involves virtual contracts, with greater risks and potential returns. Newbies should start with spot trading, experienced traders may use margin moderately, while professional traders may consider futures, but must manage risks strictly.

Ser_APY_2000

2025-11-22 15:28:08

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Entering the circle for trading, the three most confusing methods are these. Today we will get straight to the valuable insights, no nonsense.

Spot Trading - The Most Straightforward Buying and Selling

You just spend money to buy coins, and once you buy them, they are yours. If you use 100 USDT to buy BTC, the coins will be in your wallet the moment the transaction is completed. There’s no leverage, no borrowing money; you can only do as much as you spend. This is the safest way and the best place for beginners to start.

Spot Margin Trading - Borrowing to Leverage

You are still trading in the spot market, but the exchange lets you borrow money. You have 10 yuan and can borrow 90 yuan to make a total of 100 yuan to buy coins. The risk comes: if the coin price drops and your margin is insufficient, the system will directly liquidate your position, and the money will be gone. Therefore, the higher the leverage used (up to 10x), the greater the risk.

Futures Trading - Virtual Contract Gameplay

There is no need to actually own the coins. You are simply betting on the price fluctuations of the coins. If you are bullish, you open a long position; if you are bearish, you open a short position. There are two types: futures contracts (with expiration dates, from daily to quarterly) and perpetual contracts (without expiration dates, can be held indefinitely).

The leverage for futures can go up to 125 times, which seems like a way to make big money, but losses can also clear your account instantly. Additionally, there are transaction fees and funding rates to consider.

Overview of Core Differences

Comparison Item	Spot	Spot Margin	Futures	Perpetual Contract
Leverage	❌	Up to 10x	25-125x	25-125x
Expiration	❌	❌	✅ Time-limited	❌ No time limit
Risk	Low	Medium	High	High
Fees	Transaction Fee	Fee + Interest	Fee + Settlement Fee	Fee + Funding Rate
Can short sell	❌	✅	✅	✅
Liquidation Risk	❌	✅	✅	✅

How to choose

Newbie: Start with spot trading. Holding real coins in hand reduces psychological pressure.

Have experience and want to take a gamble: Spot margin can be used up to 2-3 times at most, don't be greedy.

Professional Traders/Arbitrage Seekers: Futures and perpetual contracts can be used, but stop-loss must be set, and capital management must be strict.

Remember one thing: the trading method that makes money is not the one with the highest leverage, but the one that lasts the longest.

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