What is the difference between leverage and contracts?
[1] .Different operation methods: Leverage is achieved by borrowing coins through the platform, which allows for excessive asset allocation in the spot market. The operation process includes borrowing fees + transaction fees. Contracts use a contract settlement* model, meaning that before trading, one can choose the leverage multiple of the product itself, eliminating the need to borrow coins for leverage operations in the spot market.
[2].Different definitions: Leverage trading refers to using a small amount of capital to invest multiple times the original amount, with the expectation of achieving a return several times relative to the fluctuations of the investment target, or incurring losses. A contract is an agreement where the buyer agrees to receive a certain asset at a specific price after a designated period, and the seller agrees to deliver a certain asset at a specific price after a designated period.
[3] .Different rules: Leverage trading involves investors using their own funds as collateral, along with financing provided by banks or brokers, to conduct foreign exchange trading, effectively amplifying the investor's trading capital. Futures contracts are standardized contracts designed by exchanges and approved by national regulatory agencies. Holders of futures contracts can fulfill or relieve their contractual obligations by borrowing spot delivery or conducting hedging transactions.
[4] .Different characteristics: Leverage trading features 24-hour trading, a global market, fewer trading varieties, flexible risk control, two-way trading, operational flexibility, high leverage ratios*, low transaction costs, and low entry barriers. The characteristics of futures contracts include the ability to profit from small investments, two-way trading, no need to worry about performance issues, market transparency, a well-organized structure, and high efficiency.
When trading contracts, if leverage is to be used, a performance guarantee (collateral) must be provided, which is the trading guarantee. The trading guarantee generally constitutes a small portion of the total contract value, allowing traders to control contracts worth a large amount with relatively small virtual funds, providing traders with significant flexibility and high trading efficiency.
