Futures vs. Spot Trading: Why Futures Feels Like Gambling and Spot Trading is for Savvy Investors
By Insider Pace
Hey there! If you’re diving into the world of trading, you might be wondering about the difference between futures and spot trading. I’ve been down both roads and want to share why I think futures trading can feel more like gambling, while spot trading is a better fit for those serious about investing.
Spot Trading: The Investor’s Game
Spot trading is straightforward. You buy and sell assets like stocks, cryptocurrencies, or commodities at their current market price. When you spot trade, you’re essentially taking ownership of the asset and holding it for the long term, hoping its value increases over time. This method aligns well with traditional investing principles: buy low, hold, and sell high.
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Simplicity: You’re dealing with the actual asset, not a contract or derivative.
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Long-Term Focus: Ideal for those looking to build wealth over time.
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Less Risky: Since you’re buying the asset outright, you don’t face the complex risks of leverage or expiry.
For instance, if you’re using Binance to trade cryptocurrencies, you’re engaging in spot trading when you buy Bitcoin or Ethereum directly at the current price. It’s clear-cut and aligns with a long-term investment strategy.
Futures Trading: More Like Gambling
Futures trading involves buying and selling contracts that agree to buy or sell an asset at a predetermined price on a future date. This can amplify potential returns, but it also significantly increases risk. Futures contracts can expire worthless if the market moves against you, which is why some liken it to gambling.
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Leverage: Futures often involve borrowing money to increase your position, which can magnify both gains and losses.
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Complexity: Predicting future prices and managing contracts can be tricky and requires a lot of market knowledge.
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Short-Term Focus: Futures are usually used for short-term trading, which can lead to high-stakes, high-stress scenarios.
If you’re trading futures on platforms like Deriv, you’re engaging in a more speculative game. Deriv offers various financial instruments, including futures, that cater to those comfortable with higher risk and complexity.
Pocket Options: The New Frontier in Asia and Africa
Pocket Options is making waves, especially in Asia and Africa, by offering an accessible platform for options trading. While not exactly the same as futures, it also involves significant risk and speculation. It’s becoming popular due to its user-friendly interface and variety of trading options.
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Accessibility: Easy-to-use platform that attracts new traders.
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Versatility: Offers different types of trading options, appealing to those who enjoy a bit of speculation.
However, if you’re serious about building long-term wealth, the high-risk nature of options trading might not align with your goals. It’s essential to understand that this type of trading can be more about timing and speculation than long-term investing.
In Conclusion
If you’re looking for a stable investment strategy, spot trading is your best bet. It’s straightforward and aligns with traditional investing principles. Futures trading and options, on the other hand, can feel more like gambling due to their complexity and risk.
Remember, investing should align with your financial goals and risk tolerance. Whether you’re using Binance for spot trading or exploring options on Pocket Options, make sure you understand the risks involved and choose a strategy that fits your investment style.
References and Quick Links:
BINANCE - Best for beginners and pro-experts crypto traders.
DERIV - Best MT5/MT4 derivatives ,forex and crypto broker with over 25 years of service.
POCKET OPTIONS - Versatile broker with inbuilt indicators for easy and accurate execution of trades.
Happy trading!
By Insider Pace