What is the difference between leverage and contracts?
[1] .Different operating methods: Leverage is achieved by borrowing coins from the platform to over-allocate assets in the spot market, and the operation process will include borrowing fees + trading fees. Contracts use the settlement contract* model, which means that before trading, one can choose the leverage multiplier of the product itself, eliminating the need to borrow coins to utilize leverage in the spot market.
[2].Different definitions: Leverage trading is using a small amount of capital to invest multiples of the original amount, in hopes of obtaining a multiple return on the fluctuations of the investment target, or suffering losses. Contracts are agreements where the buyer agrees to receive a certain asset at a specified price after a designated period, and the seller agrees to deliver a certain asset at a specified price after a designated period.
[3] .Different rules: Leverage trading involves investors using their own funds as collateral, with financing provided by banks or brokers to amplify their forex trading, thus increasing the investor's trading capital. Futures contracts are standardized contracts designed by exchanges and approved by national regulatory agencies for listing. Holders of futures contracts can fulfill or terminate their contract obligations by borrowing delivery of the spot or engaging in hedging transactions.
[4] .Different characteristics: Leverage trading features 24-hour trading, a global market, fewer trading varieties, flexible risk control, two-way trading, flexible operations, high leverage ratios*, low trading costs, and low entry thresholds. The characteristics of futures contracts include high rewards with small investments, two-way trading, no worries about performance issues, market transparency, and high efficiency with strict organization.
When trading contracts, if leverage is to be used, a performance guarantee (collateral) is required, which is the trading guarantee. The trading guarantee usually accounts for a small portion of the total contract value, allowing traders to control contracts worth a significant amount with relatively little virtual capital, providing great flexibility and high trading efficiency.