Margin trading vs. futures: Differences
Margin trading vs. futures: Differences
Different markets
The main difference between margin trading and futures is in the market they are traded. Margins are traded on the spot market, while futures are contracts exchanged in the derivatives market and imply the future delivery of the asset.
Leverage
Margin trading in crypto usually has a leverage that ranges between 5 and 20%, while it’s common to exceed 100% in futures.
Collateral allocation
Crypto margin accounts allow traders to leverage the spot market through a sort of loan on which interest must be paid, while futures only require a good faith deposit as collateral.
Duration
Being perpetual, the spot market requires traders to determine how long they want to keep a coin leveraged. On the other hand, futures are contracts with an expiry date that determine how long you can hold a position.
Types of investors
They target two types of traders for executing margin trading and futures. Margin trading is more for short-term investors, while futures refers more to long-term investors.
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