On MEXC, MEXCers can not only buy cryptocurrency through spot trading, but also potentially achieve higher profits through futures trading with up to 200x leverage. So, what's the difference between spot trading and futures trading? Traders stand to earn different returns from each type of trading, but what else distinguishes these two? After reading this article, you should be able to understand the basics of both spot and futures trading.
When spot trading on MEXC, MEXCers can buy and sell cryptocurrencies, like 1 BTC or 1 ETH. After purchasing cryptocurrencies through spot trading, MEXCers own those assets and can freely transfer them across different blockchain networks.
When futures trading, however, MEXCers buy and sell perpetual contracts. For example, when you purchase 1,000 cont. of BTC/USDT, this portion of your assets cannot and will not be transferred through any blockchain network.
Generally speaking, only spot trading pairs listed on MEXC have corresponding futures trading pairs. However, not all spot trading pairs have corresponding futures trading pairs. Also, not all futures trading pairs support 200x leverage, like the MX token for example.
At MEXC, the profit mechanism for spot trading is a one-way market T+0, which means traders can only go long and cannot short a position. Positions can be sold immediately after they have been bought. On the other hand, the profit mechanism for futures trading is a two-sided market T+0, allowing traders to hold both long and short positions. Positions can be closed immediately after they have been opened.
Spot trading does not require or support leverage. The leverage in futures trading is reflected by the initial margin. When trading futures, traders can hold a large position value with a small amount of initial margin, thereby increasing the potential return on investment.
Due to the different investment targets of spot trading and futures trading, MEXCers will encounter vastly different trading scenarios when chasing profits using either of these trading methods. While there may be some scenarios where spot and futures trading share similar mechanisms, the differences between the two remain significant in most cases. To understand these differences in trading methods, let's look at them individually from the simplest to the most complex.
When spot trading, you can choose from four types of orders on the spot trading interface: Limit, Market, Trigger, Trailing Stop, and Post Only.
On the futures trading interface, you can find a more diverse array of order placement options. You can select among five order types: Limit, Market, Trigger, Trailing Stop, and Post Only.
Note:
If you want to learn more about the specific order types for spot and futures trading, please visit MEXC Learn.
On MEXC, spot trading does not have specific position mode settings. However, futures trading offers more position mode options, including Hedge Mode and One-Way Mode.
Similarly, spot trading does not offer leveraged trading. However, leveraging in futures trading is common practice. Here, MEXC specifically provides users with two leverage mode settings: Simple Mode and Advanced Mode. As with position modes, MEXCers need to configure these settings before opening a position.
When spot trading, you can choose from four types of orders on the spot trading interface: limit, market, stop-limit, or OCO (One-Cancels-the-Other).
On the futures trading interface, you can find a more diverse array of order placement options. You can select among five order types: Limit order, Market order, Trigger order, Trailing Stop order, and Post Only order. In addition to these, you can also utilize features such as adding TP/SL (both [Position TP/SL] and [TP/SL in Batches]), [Flash Close], and [Close Short]/[Reverse]functions.
The most important thing to consider when choosing a trading method is to make sure it aligns with your investment goals:
If MEXCers adopt a risk-averse investment attitude based on their capital and risk preferences, then spot trading is suitable for their needs. Spot trading carries no risk of liquidation. Also, in the spot market, delistings or token price collapses are rare.
If some MEXCers consider the investment cost of certain cryptocurrencies (e.g., BTC) to be too high and find it challenging to achieve high returns without a prolonged one-sided uptrend after investment, then futures trading can meet the demands for higher investment returns and shorter recovery periods. However, it is crucial to be cautious as poor judgment calls and user errors in future trading can be risky, sometimes resulting in liquidation.
Risk Reminder: Trading carries risks, and investments should be made cautiously. The content of this article does not constitute any investment advice. Please make investment decisions based on your individual investment objectives, financial situation, and risk tolerance.
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