In the cryptocurrency world, is it more profitable to trade spot or contracts?

A financial wisdom showdown: A-share investment, spot or contract?

Imagine you have 1 million in capital, ready to make your mark in the A-share market. However, when faced with the choice between spot and contract trading, how should you decide? Let's take a rational approach and have a wisdom competition!

If you choose spot trading, according to A-share principles, you can only sell the next day. Over a year, you can trade approximately 360 times, with a transaction fee of 0.1% for each trade. This means the exchange can earn 180,000 in fees from you over the year, which is 18% of your total investment. It sounds a bit painful, but wait, let's take a look at contract trading.

In contract trading, each order only incurs a fee of 0.02%. This means the exchange can only earn 72,000 in fees from you over the year, accounting for only 7.2% of your total investment. However, contract trading has another feature: it incurs a funding fee. But this fee does not go to the exchange; it goes directly to both long and short positions. If you go long, you need to pay an additional 6% funding fee, which is 60,000; if you go short, you can earn this 6% funding fee.

Now, let's compare comprehensively. If your turnover rate is greater than once a week, the accumulated fees for spot trading can become quite substantial, making holding spot not the optimal choice. However, if your turnover rate is once a week, then the fees for contract trading seem relatively reasonable.

Of course, in addition to transaction fees and funding fees, we also need to consider the risks of stop-loss and liquidation. Stop-loss may lead to a margin call in extreme market conditions, meaning your losses can exceed expectations; while liquidation only requires a certain margin to be deducted, making the risk more controllable. But it is important to note that both stop-loss and liquidation are risks that investors must bear themselves, and the exchange does not charge for them.

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