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What is the Difference between Futures and Margin Trading?



Cryptocurrency trading includes many different strategies and tools. Some of them allow receiving significant income from small initial amounts. How is it possible? The answer is futures and margin trading. This article will try to figure out what these trading methods mean and how they differ.

Crypto futures trading means that two parties agree on purchasing (selling) crypto assets on some exact date in the future and at a pre-agreed price. Participants go “long” or “short”, which means agreeing to buy the asset or to sell it. Futures contracts can be perpetual. For example, the Binance and WhiteBIT crypto exchanges allow for this option.

Now let’s switch to margin trading. It is a method when a user borrows cryptocurrencies and uses leverage to increase the initial amount of investment. It allows the trader to receive a much bigger profit if his trade is booming.

The Difference between Margin Trading and Futures

Both of these trading methods help boost the initial investment amount. Let’s see what their differences are. So, futures vs margin trading:

  • When trading futures, participants enter a derivative agreement, which belongs to the derivatives market. Margin trading is always related to the spot market.
  • Participation in margin trading involves using leverage. Depending on the margin mode you use, it may be X3, X5, or X10 leverages. Futures allow using much higher leverage. For example, the WhiteBIT exchange allows for X20 leverage.
  • Futures trading allows making income from both upward and downward market trends. Margin trading does not imply such a possibility.

Futures Trading Margin Requirements

There can be such an option to use these financial tools simultaneously. The traditional understanding of futures is when you buy a contract for the amount you hold in fact. In the case of margin futures trading, you can use leverage to buy a contract for a larger amount of money. That is, in fact, you buy futures contract with borrowed money. For example, having $1000, you can buy a contract on $100k using an X100 leverage.

Experienced investors broadly use this trading mechanism. However, understanding how it works requires much time and practice, so it is unsuitable for beginners. If you want to try this type of trading, welcome to the WhiteBIT exchange. You can register a demo account and practice futures and margin trading as long as you wish, without fear of losing your own funds. WhiteBIT has launched demo tokens specifically for practicing and receiving skills. Once you are ready, you can deposit funds to your account and try to trade on real. We recommend starting with a small amount of money and never forget to follow your strategy.