Understand the spot market and other trading strategies: everything you need to know

If you’re just starting out in the cryptocurrency universe, you’ve probably heard of spot trading, margin trading, and futures trading. But what is the real difference between these three approaches? Each one operates differently and offers distinct risks and opportunities. In this guide, we’ll explore the fundamentals of each trading method and help you choose which makes the most sense for your profile and goals.

How the spot market works: direct transactions without leverage

The spot market is the simplest and most direct way to trade cryptocurrencies. When you make a spot transaction, you’re buying or selling Bitcoin, Ethereum, or any other digital asset at the current market price, at the moment of the trade. It’s quite similar to buying a product in a physical store: you pay with the cash you have on hand and receive the product immediately.

In practice, this means that:

• You receive the asset in real time after the purchase
• The asset is stored in your digital wallet
• You do not use any leverage or borrowed capital
• Profit comes solely from the asset’s appreciation over time

For beginners, the spot market is generally the safest option. There’s no liquidation risk because you’re only using your own capital. If Bitcoin’s price drops 50%, you lose no more than what you invested. Simple as that.

Margin trading in spot: amplifying gains (and risks) with borrowed capital

Now, spot margin trading adds a layer of sophistication. Here, the platform allows you to borrow capital to make larger trades than your actual balance would permit.

Imagine you have 10 USDT in your account. With 10x leverage on spot, you can trade with 100 USDT by borrowing 90 USDT from the platform. This amplifies your gains but also increases your risks.

The process involves:

• Loan of funds: the platform lends the additional capital needed
• Collateral: you need to leave other assets as collateral for the loan
• Interest: you pay interest on the borrowed amount
• Liquidation risk: if your collateral’s value drops too much relative to the loan, the platform automatically closes your positions

Maximum leverage for spot margin trading is usually up to 10x. While higher gains are possible, the risk is proportionally greater. An unexpected price drop can lead to automatic liquidation, where you lose a large part (or all) of your invested margin.

Futures trading: contracts deriving value from the actual price

Futures contracts work completely differently. Instead of buying the actual asset, you’re entering into an agreement: “I agree to buy Bitcoin at R$X on a specific future date.” You don’t need to actually own the Bitcoin, only speculate on its price.

There are two main types:

Futures contracts with expiration date: have a defined period (daily, weekly, monthly, quarterly). When the date arrives, the contract automatically ends, and your gains or losses are calculated.

Perpetual contracts: have no expiration date. You can keep the position open indefinitely, as long as you maintain the minimum required margin. They function like an “infinite tug-of-war” on the asset’s price.

Futures allow:

• Higher leverage: from 25x up to 125x (much more than spot)
• Short positions: you profit when the price falls, not just when it rises
• Hedging: long-term investors use futures to protect against price drops
• Aggressive speculation: traders seek quick gains from small price movements

However, with great power comes great responsibility. Liquidation in futures is as fast as in margin trading, and with higher leverage, a small adverse move can wipe out your entire position.

Practical comparison: which strategy is right for you?

Three important alerts for beginners

1. Liquidation is real: in both margin and futures, you can lose 100% of your invested capital in minutes if the market moves against your position.

2. Leverage is a double-edged sword: yes, you can earn 10x more in 10x less time. But you can also lose 10x more.

3. Start small: if you’re new to this, begin with spot trades to understand how the market works. Gain experience before using margin or futures.

The spot market remains the safest and most suitable choice for learners. As you gain confidence and knowledge, you can responsibly explore margin and futures. The key is to fully understand what you’re doing before risking real capital.