What is the Difference between Margin Trading and Futures Trading?

Margin trading and futures are two types of trading strategies that involve borrowing funds or assets to increase the potential returns or losses of a trade. However, there are some differences between them, such as:

  • Margin trading lets traders buy or sell crypto assets by borrowing funds, offering them access to greater sums of capital to leverage their positions. Margin trading could amplify trading results, potentially realizing larger profits on successful trades, or more significant losses when the market moves in the opposite direction.
  • A futures trade is an agreement to buy or sell the underlying asset at a predetermined price in the future. When you open a futures position, such as BTCUSDT, unlike spot trading where you own the asset (BTC), you are instead entering a contract to buy or sell BTC from a counterparty in the future, at a set price.
  • Margin trading is buying or selling crypto assets in the spot market, while futures trading is buying or selling contracts in the derivatives market.
  • Margin trading typically offers between 3x to 10x leverage, while futures trading can offer significantly higher leverage, up to 125x.
  • Margin trading requires you to repay the borrowed funds with interest, while futures trading uses the maintenance margin as collateral, which means there is no repayment.
  • Margin trading charges a trading fee based on the borrowed amount, while futures trading charges a trading fee based on the contract value.

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