In the current cryptocurrency world, whether it is better to do contracts or spot trading depends on your capital

If you have little capital, you can only do contracts to gamble and quickly accumulate large funds. If you have a lot of capital, you can manage your positions: 80% for spot trading and 20% for contracts!

In the cryptocurrency world, if you want to truly achieve wealth freedom and compound interest, methods and techniques as well as forming your own profit system are crucial!

Once you learn how to use it, the circle will be like your "cash machine", making money is as easy as breathing!

This article is mainly for newcomers who have just joined the Coin Country, and old players can ignore it.

The difference between spot and contract

Spot: Spot trading is similar to stocks. You can only buy long and not sell short. It does not involve leverage trading; you invest whatever amount without any leveraged nature. If the market rises, you make money; if it falls, you lose money. For example, if you buy BTC at 4000 points, even if the market drops to 10, as long as you continue to hold, it means your assets are still there. In other words, as long as the position is not closed, you may recover your capital; it's just a matter of time and whether you can endure it. If you wait for another three to five years and the market rises again, even if it goes back to 4000, you won't lose anything. To put it simply, as long as you don't close the position after buying, the asset will not go to zero. It's just a matter of time and whether you can hold on.

Contracts: Contracts are similar to futures. They can be bought long or short, and they have certain leveraged characteristics. If someone doesn't understand leverage, let me give you an example: If you only have 1,000 yuan, but you are very optimistic about a product and believe it will rise, wanting to profit from this product's appreciation, but your funds are insufficient. The fundamental difference between contracts and spot trading lies here; you can use very little capital to trade the ups and downs of high-value products. However, when you trade this product, the product does not belong to you; what you own is the right to the product's price fluctuations. It is very similar to futures but with no delay, as it is real-time trading, making it an independent trading model.

I believe the biggest difference between contracts and spot trading is the difference in trading mechanisms. Compared to spot trading, the trading mechanism of contracts involves a leveraged margin two-way trading mechanism. Leverage magnifies your profits and losses exponentially. Margin means using a portion of your account balance as collateral to trade amounts that you may not even be able to trade yourself.

The concept of two-way trading is easier to understand; you can buy long when the market rises and sell short when it falls. The key factor here is leverage, which many friends say makes contract trading much riskier than spot trading. Leverage magnifies your profits and losses exponentially, which makes risk control more stringent for many investors. In my opinion, risk itself is not leverage; it exists in the investor's own understanding and control of risk.

Spot and contract each have their advantages.

Advantages of spot trading:

1. Buying spot is equivalent to owning the goods. You buy as much as you have, and even if the price falls significantly, the goods are still yours. If the market rebounds later, you will still make a profit;

2. As long as the value of the goods still exists and people still recognize it, even more people are recognizing it, although the time it takes is uncertain, there is still something to look forward to later;

3. For those with a low risk tolerance, spot trading does not require high technical skills because what you care about is its potential for future appreciation without needing to pay close attention to price fluctuations (it is important to note that there are still risks even in spot trading).

Advantages of contracts:

1. Two-way trading allows for both long and short positions. Having an additional direction provides more choices, and more choices lead to more profit opportunities; even placing an order with your eyes closed gives you a 50% chance of making a profit.

2. Hedging (also known as risk hedging): For example, with 100,000 yuan, if you buy all spot at a price of 10,000, you can buy 10 units. If the market price drops by 10%, you lose 10,000 yuan. However, if you use 50,000 yuan to buy 5 units of spot, and then use 5,000 yuan as margin to open a 10x leveraged short contract worth 50,000 yuan, when the market price drops by 10%, you lose 5,000 yuan on the spot but gain 5,000 yuan on the contract, perfectly offsetting each other with no profit or loss. This is hedging;

3. Ignore the bull market. Whether in a bullish market or a bearish market, contracts are unaffected. As long as there is enough price fluctuation, there are opportunities for profit;

4. Opportunity for sudden wealth; due to the leveraged nature, theoretically, you can use low costs to seek dozens or hundreds of times profits. In the bear market, it is no longer possible to have such high returns, and the previous chaos has become history. Only the contract market still has this opportunity, which is why the global trading volume in the contract market is so massive.

Summary:

In any market, there is always risk, even putting money in the bank faces the risk of inflation. Where there is risk, there is also return. It is precisely because of the relationship that the greater the risk, the greater the return, that in a higher-risk environment, more people can gather due to the countless opportunities. For those looking to find wealth on this road full of opportunities, I have only eight words: steady and steady, step by step.

Investors who have read the article should have a comprehensive understanding of the relevant content. Although both trading methods can make a profit, "investors are still more inclined towards contract trading with higher returns. It is important to note that contract trading brings high returns, but also high risks, and even some experienced investors may fall into traps. Therefore, for beginners, it is still not recommended to choose cryptocurrency contract trading; protecting your asset safety is the most important thing.

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