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#tradingtechnique 1. *Spot Trading*
You buy/sell crypto directly and own the asset immediately.
*Pros:*
- *Simple*: You buy 1 ETH, you own 1 ETH. No liquidation risk.
- *Lower risk*: Max loss = what you invested. No leverage = no -100% in 5 minutes.
- *Good for long-term holding*: You can hold for years, stake, use in DeFi.
- *No funding fees*: You just pay trading fees.
*Cons:*
- *Lower gains*: If ETH goes up 10%, you make 10%. No leverage.
- *Only profit when price goes up* unless you short on some exchanges.
- *Capital inefficient*: You need $2,000 to buy $2,000 of ETH.
*Best for*: Beginners, DCA/investing, holding coins you believe in long-term.
2. *Futures Trading*
You trade contracts based on price, often with leverage. You don’t own the actual coin unless you take delivery.
*Pros:*
- *Leverage*: 5x, 10x, 20x leverage means $200 controls $2,000-$4,000. Bigger gains if right.
- *Profit both ways*: Go long if you think price goes up, short if you think it goes down.
- *Capital efficient*: Less capital needed to take larger positions.
- *Hedging*: Miners, institutions use it to hedge risk.
*Cons:*
- *Liquidation risk*: If price moves against you, you lose everything in that position. 10x leverage = 10% move wipes you out.
- *Funding fees*: Every 8 hours you pay/receive funding based on market sentiment. Can eat profits.
- *Stress & complexity*: You need to manage margin, liquidation price, leverage.
- *Not for holding*: Funding + volatility make it bad for long-term holding.
*Best for*: Experienced traders, short-term moves, hedging, those who understand risk management.
3. *Quick comparison*
**Spot** **Futures**
**Ownership** You own the crypto You own a contract, not the crypto
**Leverage** None Up to 125x on some exchanges
**Risk** Low to medium High to very high
**Fees** Trading fee only Trading fee + funding fee
**Liquidation** No Yes
**Best for** Investing, beginners Short-term trading, experienced users