Have you wonder why so many people complain and some don't whenever theres a crypto crash?. It's because some people are using future trades while others used spot trade.
Let's look at spot trading
Spot trading is buying it selling assets for money. E.g you buying BTC with USD on an exchange.
Future trading is when you agree to buy or sell an asset at a particular set price on a future date, they used leverage to amplify gains or loses.
Imagine you check an exchange and see BGB at $4.8. you decide to buy 100 BGB using USD. When you place a spot trade, you are paying $480, you will instantly receive the BGB. Now if later you see that BGB as risen to about $5 and sell your 100 BGB at the $5, you will make a profit of $20.
This is how spot trade works, it's transactions happens immediately at the current market price when you buy or sell. This makes it very safe to trade on spot and simple to execute it as it follows current price.
Future trade is just like you entering a contract to buy or sell crypto assets, on a predetermined price on a specific future date. Future trading makes a trader to bet on prices of the asset without owning them.
Future is very risky.
Imagine you trade BGB at $4.8 today but you believe that the price will rise, you enter a future trade to buy 10BGB that any day from now that BGB will fall to $3.5, If it happens so, you now buy at $3.5 and sell triggering the price at $5 and sell, you will be getting an excess reward.
But if BGB price drops to $2.8 you will still be force to buy at that $3.5 but at your lost. Future trades are always at higher risk e.g it's volatile, it doesn't have fixed price, it can drop now and pump again in seconds, it can even wipe out all your capital.
Spot is simple to trade, it's always mainly for those that do not have experiences in trading. While future is risky is this future trade that makes some people to cry when ever there's any crypto crash.
Am @theycallmevick, I write about little things we should know about crypto currency
📸 The images are screenshots from my phone
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