Explain the difference between spot trading and futures?
Many new traders do not know what spot trading and futures are. I will explain the difference in an example, God willing. It will clarify:
Spot Trading and Futures Trading are two types of trading in the financial markets:
Spot Trading
1. *Price Setting*: The exchange rate is set at the current time.
2. *Execute the deal*: The deal is executed immediately.
3. *Asset Delivery*: Financial assets (cryptocurrencies, stocks, commodities, etc.) are delivered instantly.
4. *Real Trading*: Trading is done at real prices in the market.
5. *Limited Risk*: The risks are limited to the current price.
Futures Trading
1. *Fixed Rate*: The exchange rate is fixed at a specific future date.
2. *Deal Execution*: The deal is executed on a specific future date.
3. *Asset Delivery*: Financial assets are delivered at a specified future date.
4. *Contracts Trading*: Trading is done in futures contracts, not in real prices.
5. *Higher Risk*: The risks are higher due to potential price fluctuations.
(Note: Futures contracts are forbidden in Islam.)
Main difference
The main difference between spot trading and futures trading is the date of execution of the trade and delivery of the asset. Spot trading takes place immediately, while futures trading takes place at a specified future date.
Risks
1. *Market Risk*: Fluctuations in prices can affect the value of an investment.
2. *Credit risk*: The risk of not meeting financial obligations.
3. *Liquidity risk*: The risk of not being able to buy or sell assets.
Strategies
1. *Technical Trading*: Using technical analysis to identify trends.
2. *Trading by Fundamentals*: Using fundamental analysis to determine the value of assets.
3. *Trading with expectations*: Using expectations to determine future trends.
It is important to trade carefully and carefully consider the strategies and risks before making any investment decisions.
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