📊 Margin Trading vs. Futures Trading 📊

Another popular method of trading is margin trading. Let’s define how margin and futures trading are similar, and what sets them apart. Both futures trading and margin trading allow traders to amplify their returns with a relatively low amount of cash. They also both allow traders to speculate on price movements by allowing them to buy/go long or so/go short.

Differences:

1. Concepts:

a. Futures trading: The forward contracts of commodities or standardized financial assets are traded; buyers and sellers buy/deliver an asset at a predetermined date and price. Futures are independent derivative products in the crypto market.

b. Margin trading: Margin defines the asset used as collateral that traders deposit in order to borrow funds. Here, they can borrow much more than they put in, magnifying profits with a smaller amount of capital (which also comes with higher risks); it is important to note that margin trading is an extension of spot trading.

2. User experience:

a. Futures trading: Differentiated trading screen; up to 100x leverage.

b. Margin trading: Since this relies on the spot market, its trading screen is similar to that of the spot market; typically features 1x-5x leverage.

3. Fees:

a. Futures trading: Futures trading fee (low) & funding rate (perpetual contracts only).

b. Margin trading: Spot trading fee & interest charges based on the loan.

3. User action:

a. Futures trading: Two directions; users need to select buy/sell and the leverage when opening a position.

b. Margin trading: Two directions; when opening a position, users need to borrow tokens accordingly depending on the direction (buy or sell)

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